Monday, December 22, 2008

We Need More Authenticity and Transparency

Imagine that you gave your child money to finance their education, books, room and board. Now, imagine that you called your child to ask where they were using the money and they told you that they "decided not to disclose that information". Might not be the best course of action your child should take!

This is what is happening right now with the banks that took OUR money so that they could survive the economic turmoil and free up intrabank loans and credit to borrowers. Billions have been given. The media has called the banks asking what they have been doing with the money and have been told, in many cases, that the banks "have decided not to disclose this information to the public". It turns out that Cong. Barney Frank also has received little information about what the banks are doing. Who is getting information is not really clear.

So, let's get this straight. The government uses public money--money from taxpayers--to bail out the banks and the banks then choose not to disclose how they are using the money? This does not seem like a good way to build (rebuild) public trust.

With so much public distrust of financial institutions and so much angst on "Main Steet" about not only the economy but also whether or not the $700 Billion bailout efforts by the Treasury are working, one would have hoped for a lot more. One would have hoped that the banks would in full transparency mode, trying to help a skeptical public to understand that they were using our money wisely.

Perhaps the banks have decided that it is best not to provide details to the public since these might be misinterpreted. However, the answers from the banks give no hint of this. They only smack of arrogance that has been the hallmark of the big Wall Street institutions for some time. They all got themselves into trouble with risky, ill-advised loans. Now they want us to believe that they are managing things well and do not need to answer questions from the public. Nice try!!

I really believe it's time for some tough love. We need to tell the AIGs and Bank of NY Mellon, and the other companies that do not want to share information or who decide that they will use the money for executive retainers (when there are few jobs, there is little need for a retainer to an executive), that the game is over. They have until a given date to disclose this information to Congress. If they have not met these obligations, we call back the loan. Let those who do not want to be transparent fail and consolidate with those who want to act responsibly.

The banks that are acting responsibly should start to pressure their colleagues. The reputation of the entire sector is being damaged.

Monday, December 15, 2008

British Airways and Cole Haan Have a Lot in Common

I recently returned from a reputation conference in England where I gave a presentation on brand and reputation leadership. One of the speakers before me was from British Airways. Some readers may know that British Airways and the British Aviation Authority (BAA) have been embarrassed by problems with the new Terminal 5 at Heathrow Airport in London. There have been countless problems, most now corrected. While the terminal was built by and operated by BAA, it was used exclusively by British Airways. With both the public and government irate and the news media in a frenzy, the chairman of British Airways stepped forward and took the blame and the responsibility for fixing the problem. Many questioned why he would do this rather than allowing the blame to fall on BAA, where the criticism should be directed.

I applaud British Airways for their stance. They recognized that Terminal 5 and BAA is a distributor of their brand. When travelers go to Terminal 5, they do so for one reason only--to catch at BA flight. Whether or not they liked it, it was BA's problem--it impacted their brand and corporate reputation. Kudos to BA!!

I also want to compliment Cole Haan for their commitment to customer service. My wife recently purchased a purse at one of their outlets. When we got home she found that the purse was smaller than she needed. We were walking in Center City Philadelphia and stopped into a Cole Haan retail store. She saw a purse she wanted to buy and asked if the next time she was in she could bring back the purse from the outlet. We assumed that the answer would be no. Most retail stores maintain a distance from their outlets. She was told "of course; no problem".

What Cole Haan recognizes is that its brand is one both the retail and outlet stores. People are dealing with Cole Haan and they are smart enough--actually smarter than most companies--to recognize that they should deal evenly with their brand. Kudos to Cole Haan! They have gained my trust and my continued business.

I wish more companies would recognize the leasons of BA and Cole Haan--that different distribution channels do not remove the responsibilities of protecting their brand.

Friday, November 21, 2008

So You Want to Create a New Category!?

Over the course of my career, both inside of companies and as a consultant, I have come across many people who state that if you don't like the category you're in, then change the category. That has become somewhat of a marketing mantra. The problem is, it is wrong.

Categories exist in people's minds. There is a search engine category, a fast food category, a luxury goods category, etc. Categories are collections of companies meeting similar needs. Categories do not exist because someone has decided they should. Rather, they exist because the market has put them together. It is the market that determines if a category exists.

Let's look at a few examples: FaceBook was a new type of social networking site, but it joined the category of social networking sites with MySpace, YouTube, and others. It did not form a new category. It positioned itself as point of parity against its competitors--that is, like but better than others. It's value proposition was that it fulfilled a need and interest other sites did not. When Google came into the search engine market, it did not try to form a new category. One already existed called search engines. It too sought out a point of partity differentiation.

Recently, I heard a Wendy's commercial in which it says it is "way better than fast food". Really? There is a fast food category. What category is Wendy's in if it is not in the fast food category?

Al Ries, the brand expert, talks about "category before brand". People think category first and then seek the brand that defines the category.

It is possible to create a new category, but that can only happen when there is a disruptive technology that allows a company to change the entire way something is done. As Clay Christensen of Harvard Business School, the creator of the concept of disruptive change, notes, this type of change occurs when an industry is doing things in a certain way and then something comes along to change the way it is done. It can create a whole new category because it is so different. The Internet was such a disruptive technology. It helped to create whole new categories that never existed before.

Just because a company believes it may have a better value proposition than its competitors does not mean that it can create a new category, even if it does not like the category that already exists. Differentiation is important in brand and reputation, but differentiation does not mean a different category.

There is a brilliant article in the current issues of Corporate Reputation Review by King and Whetten who note that there is a difference but a link between what they call ligitimacy and reputation. Companies they note must first establish legitimacy within their industry group. Reputation is being distinguished from peers. It is a great concept. Similarly, brands must establish their legitimacy within their category and can enhance their equity when they are distinguished. But, it takes a whole new way of doing things to create a new category.

Thursday, November 20, 2008

A New Concept of CSR is Needed

The term Corporate Social Responsibility (CSR) is a catch phrase that means different things to different people. To some, it suggests philanthropy, to others is means getting involved in the community, to others it means sustainability (e.g., triple bottom line measurement of a company on its impact on society, economy and environment).

There are several things I dislike about the concept of CSR. First, it suggests that a company do something, anything to "benefit" society. This leads to all kinds of investments by companies in things that have little ROI to them or to the larger community. There is no strategy; it is purely a tactical attempt to be nice to someone in hopes that it will pay dividends or because the CEO has a special pet project. Second, it makes companies think that they can boost their reputation purely by doing something for the community. No company that I know of has built a reputation purely through CSR.

Now, let's understand that companies that want to be considered leaders are expected to be leaders in the larger society. They will be conspicuous by their absence. One cannot hide if one wants to be a leader. In fact, the concept of leadership mitigates against wanting to hide--one wants to lead, to be seen, to inspire and engage others.

I believe that CSR should be redefined as corporate social engagement (CSE). CSE is active; CSR can be passive. CSE is broader also. To become engaged, one needs to understand and respect the larger society and the pushes and pulls of various stakeholders. One negotiates and builds relationships rather than acting like a wealthy donor. Companies have adopted the concept of "noblesse oblige"; that those with wealth and social standing owe something to society. I believe that those who have been blessed with such good fortune should want to help society improve, but it depends how it is done.

CSE is a different concept. It means thinking about the issues of society that also involve the company and engaging in dialog and relationships to create something better "together". It means taking a systems approach and seeing the company as part of the larger social system.

Let's take an example. GM has given away a lot of money. Now, it is nearly broke and is cutting out both its CSR programs as well as some marketing activities like car shows and NASCAR sponsorships. If GM had a sense of CSE, it would never have allowed its CEO to travel to Washington to beg for money by flying in a private jet which was met on the tarmac by a private limo. The company would have understood that its relationship with society had changed and that it needed a new way of behaving. Some have suggested that this was a PR failure--they should not have allowed themselves to be seen as being this callous. I disagree. It was not a PR failure. It was a GM cultural failure. It is just one of the signs of what has gotten them into trouble in the first place. The management gets rich so they have to make the workers rich and they end up making cars that are too expensive for the market. They don't really engage in the outside world--they only study it through marketing research, so they continue to make Hummer's even though they know that oil prices will at some time go through the roof. Some people don't get it (read my blog about AIG, another company that cannot be educated.

Under the old concept, I'm sure that the folks at GM would say: "let us get rich again and we will give away large amounts of money like we used to". That's the wrong way to think. That's akin to steel companies making millions in Pittsburgh yet suffering through riots because of their poor employee treatment, yet getting praise for building libraries, museums and schools. That is the feudal prince approach, not an engagement.

Don't get me wrong, there are a lot of "little people" and their ranks are growing everyday in our current financial meltdown. Lots of people need help. It is times like this when companies say that they would love to do something but do not have the money for CSR. They may not, but they certainly have and have had the "sweat equity" of their expertise to help the larger community through engagement. There are many financial experts in large companies who could help non-profits and city government manage through difficult times--that kind of investment would be true engagement, would help tremendously, and be valued. It might not be as visible and it might be a longer-term activity, but it would start to get the company out of its insulated perspective and help it to become part of the larger society.

That's the point between CSR and CSE that is important. The concept I would like to see is for companies to consider themselves as part of the larger society--part of a system--rather than defining themselves as "us" and the rest of society as "them". A boss of mine early in my career cautioned me to not allow myself to get caught up in what he called the "convent mentality" of most companies. Within the convent, everyone has the same religion and the same spirit of love for "the one true God". Outside of the convent are all those who need to be saved because they do not have the "right religion". Too many companies have behaved this way. I believe in the Unitarian principles, that we are all seeking the same spritual path but in different ways that need to be respected, even if not understood. We have to find ways to engage if we are going to move along the path together, while still allowing each company to follow it own "spiritual path".

Monday, November 17, 2008

What to do with GM?

What a strange situation we face! GM is pressuring the government for a bail (hand) out. They want a minimum of $25 million on top of money they have already received to help them make it--for how long few know.

I cannot imagine GM surviving. This is a company that has been so poorly managed over the years that it likely should not survive. It is a dinosaur--a large one. The larger the dinosaur, the slower and more agonizing the death. But, dinosaurs die. The market, like life itself, ebbs and flows. Look back at the Dow Jones in 1970 or 1980. Many of those companies are no longer around. We all survived well.

GM has a scare tactic. The economic exponential of their failure would mean 2.5 million jobs. I don't doubt that number is right. GM failing would bring down most of their suppliers, the dealers, workers and others. They have a huge supply chain. It would all collapse.

But, people will still buy cars. It's not like there is nothing to replace GM. They are failing, in part, because people don't like what they make and also what they make cannot be made at a cost that can reasonably be passed on to the consumer.
If they fail, people will buy cars with names like Honda, Toyota, etc. Come to think of it, they already are. In just the past 10 years, the majority of cars sold in the Philadelphia area went from American made to foreign made. The percentage of non-Detroit cars bought keeps growing. Why? Because few people like what Detroit is making. The market has spoken.

Could GM have done better? Yes, it could have not given away the store to the unions. The average GM worker with wages, benefits and pension costs GM about $78. The average for the same worker at Toyota is about $45.

So what are we going to bail out? The company will fail eventually. It is too big to change quickly enough to save itself. The dye has been cast. The GM brand has become "untouchable".

Will we bail them out? We likely will. The bulk of the union workers live in states like Ohio, Indiana and Michigan, states that voted Democratic. This will be a political bail out, not a smart business bail out. President-Elect Obama is very smart and very politically savvy. He also knows that the country does not need any more bad news that could cause people to go from a recession mentality to a depression mentality, because he knows that economics is part perception and part financial.

This is a no win situation for everyone.

High Praise for Goldman Sachs Execs

In a recent blog, I chastized AIG management for not understanding the word "optics". The management team at the insurance giant seems to be incapable of understanding the world outside of their confines on Wall Street. They just don't get it.

Today, however, came word that the maanagement team at Goldman Sachs will not take their bonuses in 2008. This is a big deal! The decision effectively caps the salaries of the top team at Goldman at $600,000. While few people will cry for them, let's put in perspective that last year the CEO took home about $68 million.

Now, many would say that the execs don't deserve a bonus in the first place. That may be true. But, as we can see with AIG, there are many things that may not be deserved that people do not often understand. Bonuses have been awarded to countless executives whose companies have nearly tanked. Currently, Chrysler has on its books millions of dollars in promised "retainer bonuses" for its top team--given when DaimlerBenz divested itself of Chrysler to keep the top team in tact for a new owner. Why anyone wanted to retain this group of people who have mismanaged the company, I cannot figure out, but the bonuses are supposedly legally owed. This means that Chrysler could be in a position of asking the US for a hand-out with part of the money used to pay millions to its top executives. Outrageous! AIG is fighting the federal government on back taxes with--you guessed it--tax payer money. Perhaps it is time for the shareholders of AIG--US tax payers--to demand that all of the management team there be fired and the board be replaced. What else can one do when it seems impossible to change the behavior of a company?

So, with all of this going on, I think that we should all thank the top team at Goldman. They will now draw a line in the sand passed which few will want to cross. It will be interesting to see if anyone has the nerve to go in a different direction.

Saturday, November 15, 2008

Starbucks--Can an Expanded Brand be Contracted?

Starbucks began as a creation of Howard Schultz--a high-end coffee house in the European tradition. Flavors and armomas of coffee being ground, people lingering, a feeling of neighborhood. It was a life-style brand.

When Schultz stepped down as CEO, his successor changed the brand by expanding it. Food was brought into the stores; coffee was no longer ground. The customer base was expanded by "dumbing down" the original concept to appeal to a wider audience.

Schultz is back and has brought back with him his original chief marketing officer. The two want to recapture the Starbucks brand that they first created. However, the question is whether or not the "horse is out of the barn". The brand is no longer the same and the question now is whether it can be contracted and returned to its original. It is a facinating brand question and living case study.

I am not sure that Starbucks can return. Consider that the brand was built in a time of good economic growth. People had money and were willing to pay $4 for a latte. It was a bit of an extravagance, but Starbucks was not for everyone--it was only for those who appreciated high quality or for those who wanted to be considered well bred enough to appear to appreciate the coffee and the experience. It was the experience (life style) that was being sold. Starbucks created an XM radio music station so that you could "take the experience with you".

Mistakes were made--they are made in every business. From a brand perspective, I cannot quite understand why they licensed their name to franchisees that opened small "Starbucks" at service stops on highways or in college classroom buildings. These bear the Starbucks name, but do not offer the Starbucks experience--just the coffee--but it is made by people who could be working at McDonald's, not baristas like they have in their "real" stores. It is a diluted Starbucks. A mistake.

The economy is bad now and a $4 latte looks a lot more expensive than it did a year ago. Starbucks recently announced a quarterly proft loss of 97%. The company is loosing market share to McDonald's, Dunkin' Donuts and the like. How many of these people will return to Starbucks once the economy improves after they learn that coffee at 1/3 the price is not that bad?

I am not a Starbucks customer, but I wish them well.

Thursday, November 13, 2008

Has AIG Heard of the Word "Optics"?

When I was active as a corporate executive, we had many occasions when our financial situation was not going full steam. There were many times when we had to curtail spending and change policies mid-stream. I remember on many occasions debating with my colleagues whether or not first-class travel, high-priced meetings, and other such spending areas should be curtailed for everyone. The challenge I repeatedly set before our group was this: "what would be the optics of doing such-and-such?" How could we ask employees to cut back if executives still flew first class or had meetings at the Ritz? In fact, we changed several of our executive retreats from high-priced resorts to the Executive Suites, not only to save money, but also to send a message that it was the meeting and not the surroundings that were important.

With this in mind, I listened the other day to the CEO of AIG trying to explain to Larry King the rationale for having a training session for independent agents at a high-priced resort in Phoenix. He explained that training is important for these people to help them sell the right AIG product. He also explained that the company defrayed costs by having sponsors pay for much of the meeting.

I sat an listened and thought to myself: "these people just do not get it". It is a matter of optics. It was going to look bad and should never have been done. No amount of explaining this intellectually will negate the fact that taxpayer money has bailed out AIG and that they are playing at expensive resorts with our money. They may explain how important this was and how they got others to help foot the bill, but the question reamins: why didn't you go to the Executive Suites or Hilton? Couldn't the meeting have been just as well done there and for even less money? I know that they likely already had a contract and might not have been able to cancel, but cancelling and taking the financial hit might have made them look even better. In addition, a television news crew followed AIG executives through the airport trying to get comments. They followed them all the way to their plane through--you guessed it--First Class boarding. Tough times at AIG!!

I am starting to wonder whether it might be worthwhile to bring in outside directors onto the boards of companies the government bails out. We are putting money into companies that got themselves into trouble because of their own bad actions. Their boards were part of those bad decisions and to expect the same boards and same management teams to act more responsibly may be too much to ask. Perhaps the taxpayers need some representation on these boards--after all, we own the companies!

Wednesday, October 8, 2008

The Diminished American Brand

As a follow-up to my earlier post, I thought it important to note that what has suffered most is the American brand. What this means is that people inside the country and those around the world no longer view America as having the same attributes that it ones had. America was a place of enormous opportunity, wealth and creativity. There was nothing we were afraid to do, and little we could not accomplish if we put our minds and resources behind it. That was the perception, real or imagined, and people responded. It was no surprise that at one time a large portion of those founding Silicon Valley companies came from other countries, drawn to the US because of capital and our willingness to invest in potential. We were not a country looking toward the past, but one always looking to the future.

This economic mess has unraveled that brand. We are now looked at as being reckless and greedy. The same attributes that were respected are now looked at from a different perspective and they don't look very good.

Why should this matter? Brands differentiate and create desire and behavioral action. People buy, they invest, they join, etc. What will happen when people do not believe in our markets? What will happen when the best and the brightest from around the world no longer want to come here? What will happen when the dollar is no longer a currency that people covet and benchmark?

The other issue is that brands are always judged within a context of competitive offerings. We have now helped to elevate the brands of places like China, Brazil and India. They have serious problems, but they have future upsides that to many appear much more appealing than the US. This is sad.

Can we reverse this problem? Yes, brands can be rebuilt when the foundation of what made the brand great in the first place still has substance and perceived value. The next president will be the leader of brand America and will have to regain the confidence of those inside the country first and then regain the confidence of those outside the country. It won't be easy. We have a deficit of mammouth proportions--almost unimaginable. The Bush Administration has left us in shambles economically and with few friends around the world. Most of the world is smiling that the arrogant Americans are getting knocked down a notch. The smile would be larger if we weren't taking the rest of the world with us.

What the Hell is Happening?

As we go through an economic meltdown, the US Congrees has brought before it the CEOs of several companies that were directly involved with the economic crisis, including Lehman Brothers and AIG. Others will follow.

The CEO of Lehman sat there calmly and defended his salary of nearly $60 million and disputed the contention that he had taken $400 million from the company. "I only took out about $250 million", he said. Well, now everyone feels a bit better and a little more sorry for him!! Thousands of Lehman employees have lost their jobs, the bad debt accumlated by Lehman has helped create our worst economic disaster since the Depression, and a CEO has the nerve to sit there and argue over his millions in salary and bonus. Never mind that this fellow should be in jail for giving false information to investors just weeks before going bankrupt. He was dealing with the best information available? Yeh, right! Is he that inept or does he have such poor financial managers that he would make such an aggregious mistake? Or, perhaps he is lying. Ya think??

Next came AIG and the fingers really started to point in all directions. Hank Greenberg, the former CEO blamed the most recent CEO, who blamed everyone else other than himself. Now we hear that AIG took the taxpayers money and held a $400,000 event. These people should be forced to give back every cent and also be investigated for fraud.

What the hell is happening in America right now? Our ills are causing a global economic crisis, but most importantly, our ills are creating a new lack of trust and decline in esteem for American capitalism. When Republicans who fought Franklin Roosevelt on social security, claiming it was socialism, have to support a government bailout of Wall Street, you know things are bad. Whether the $700 Billion infusion will work is not yet known. The continuing bad news each day is now creating a mental situation that expects things to get worse, and perceptions are the same as fact in the marketplace--expecially when one isn't certain of what the facts might be.

I do not know all of the facts--no one does. But this I do know. There has been a lot of wrongdoing and our entire system will pay the price. By our system, I mean the interrationships in our economy that are built on trust. We don't know who to trust now, so we don't trust anyone. When trust evaporates, so do investments, retail spending, credit, etc. The economy starts to unravel.

We all heard stories of 25-year olds on Wall Street with multi-million dollar condos, and a home in the Haptons. We have read about the e-mail from one who said "I hope we are all rich and retired when this starts to unravel". The sad thing is that many of them are still rich with money made from greed that has ruined the lives of millions of people.

If life were fair, the riches these people took would have to be given back or paid out through charities to benefit those who are in ruin. But, this is not Hollywood; this is reality. And it sucks!!!

Sunday, September 7, 2008

Companies Should Live By Their Values, but Which Ones?

Values are becoming an increasing area of interest and concern for corporate executives. The Arhtur W. Page Society’s The Authentic Enterprise document suggests that communications professionals should help define their company’s values, not just articulate them. Bill Nielsen, retired head of communications at Johnson & Johnson, has been urging the profession to take ownership of values and has put together a “credo” of values for the profession to follow. In addition, the Arthur W. Page Center for Integrity in Public Communications at Penn State University has put out a call for research aimed at determining if values play a role in a company’s behavior.

This focus on values is well founded. Values form the foundation of an organizations reputation, since they shape organizational strategy, its decisions in terms of what and what not to do, its policies and practices, how it treats employees, and ultimately, its actions toward its external stakeholders.
While many communications professionals have been entrusted with leading their organizational efforts to define its “vision and values”, there still remains a question whether or not we are helping to develop and then articulate the real values of company.

Organizational business strategists differentiate between “first-order values” and “second-order values”. The former are values that are intrinsic to the organization --part of its cultural DNA. The latter are values that the company articulates and attempts to demonstrate through a variety of external programs because they are believed to have market benefits. It is interesting that many business writers include CSR programs as examples of “second-order values”.
At first glance, the inclusion of CSR as an example of what a company does to influence the market perceptions may seem to be an affront to communicators. However, upon honest reflection, one can recognize that far too often companies espouse values that are different from those they live. Moreover, many communications professionals have been behind these efforts to make companies appear to be something that they are not. Some companies have external programs that reflect their true values; many, however, have external programs that are designed to make them look good to stakeholders and have little or no relation to the real values of the company.

Over the course of my career, I have managed, talked with and worked with countless professionals inside the company and the agencies serving the companies. Far too often, there was a tendency to believe the corporate leadership’s view of what constitutes the company’s values and far too little attention paid to really “taking these views to ground” to determine if they were in fact real.
Let’s consider that Enron had a statement of values which they called RICE (respect, integrity, communications, excellence). It is clear in hindsight that these values were not worth the paper they were printed on. Enron had values, but these were primarily focused on creating financial value for shareholders and the senior management team. Or, consider Mattel, a company which had well articulated values about its responsibility to its customers and other stakeholders on its website. After learning that its toys made at its outsourced plants in China contained lead, Mattel failed to file the mandatory 24-hour notice with the Consumer Products Safety Commission, took 6-weeks to withdraw its toys from the market, blamed the Chinese and claimed no responsibility for the problem. Another example comes from a major corporation where I was called in to be a consultant. The CEO was upset that his company did not enjoy the reputation he believed was deserved and indicated that another company in the same industry was viewed much more positively. He was jealous, angry, defensive of his company, and wanted my counsel as to how to build the reputation. I asked him some pointed questions to determine if there were gaps between his view of the company and the perceptions of stakeholders. He readily admitted that employees of the company did not believe that the executives “walked the talk” and that he backed promotions of those who were good at financial returns even if they were not well regarded as people managers. I challenged him that this was a serious gap and noted that the company he envied was well known as one of the best companies to work for and placed high value on the ability of managers to be both financially profitable and to build a positive work environment. They would not accept those who were only financially oriented. Other questions led me to recognize that he wanted to “paint a good picture”, but that the reality of the company left much to be desired. I indicated that I was not right for the job. Instead, he hired an advertising and PR firm that could help shape his “image” the way he wanted.

In contrast, consider the Tylenol crisis that confronted Johnson & Johnson in 1982. While many people point to this as an example of good crisis management, which it surely was, the real learning for me was that the company turned to its values to determine what to do. J&J turned to its Credo for guidance and determined that that document “required” it to withdraw its products from the market within 4-days, stop all J&J advertising for several months, and introduce new packaging within 2-weeks. This was a true demonstration that J&J had first-order values that it lived by, while the other examples noted above had only second-order values.
So, while I applaud the efforts on values, I also challenge all of us to really recognize the difference between real (first-order) and articulated (second-order) values. Conduct research with employees and external stakeholders to determine the gaps between the organization’s values, perceptions and culture. Values-perceptions gaps will highlight that external stakeholders do not believe that the company behaves in accordance with its articulated values; while values-culture gaps will determine if employees believe that the company “walks the talk”.

I believe that unless we are dealing with “first-order values”, we will not be able to realize the full reputation value of our organizations and the type of organizational change espoused in The Authentic Enterprise.

Monday, August 4, 2008

Is This Any Way to Select a President?

It has become a source of dismay to me what has happened to the election process in the U.S. Clearly, if one reads U.S. history there were nasty campaigns as far back as the early 19th century. However, the more recent attacks and character blows are really troublesome. We are electing the leader of the "Free World", not American Idol. Comparing Barack Obama to Brittany Spears and Paris Hilton may be cute, but hardly the stuff of good debate. I used to be a real John McCain admirer. I have lost respect for him. He is allowing himself to follow the same strategy that was used against himself in 2000 by George Bush.

We have serious problems in this country. Once cannot help but get the feeling that we are on the edge of a cliff. The era of the American Empire may well be coming to an end. All great empires have had their day. And, most have never seen or admitted that the end was coming. We coninue to tell ourselves that we are the leader in wealth, education, etc. Other countries are coming up rapidly and we are in a different world order. But, what we get is Obama pandering to the left and their calls for doing away with NAFTA and other treaties and somehow bringing manufacturing jobs back to the U.S. At the same time, McCain talks about the aftermath of Iraq as if we were dealing with a world order in the 1940s.

The saddess thing about this is that most of the public doesn't want a debate or real substance. They want their politics dumbed down to emotional jabs. Who can "dis" who the most. "Oh no you didn't......."

I can't help feel a bit down and concerned for the country I love so much.

Tuesday, July 1, 2008

Is a New Educational Model Needed?

I've been thinking a lot lately about the way we teach students subjects and issues related to corporate communications, brand, reputation and the like. I have been in dialog with a number of leading educators and professionals about this issue. I think we are all coming to the same conclusion: that something needs to change.

Currently, students are coming from departments, schools and colleges of communications, as well as from business. I have taught in both areas. My experience has found that communications students are far more wanting of knowledge of business than business students are wanting of communications skills. What does this mean for the future? I think that what it will mean is that many of the jobs in communications will be filled by the business students who may be better qualified. It is already happening. Not only are business major desired, but many communications jobs are filed by non-communications majors.

Communications training continues to focus heavily on "campaigns", as if strategy and management were something other disciplines do. While business students may take such campaign courses in advertising and marketing classes, they move quickly into strategy and marketing management classes. As such, business graduates, in my opinion, come out with a deeper and broader understanding of how communications issues impact business. Communications students seeem uninterested in business--trying to avoid it in large part; moreover, the communications faculty come from traditional communications educations or, if they come from "industry", they typically have background in agencies where their natural inclination is campaigns. When I have taught brand and reputation classes in communications programs, I have found that students have not even understood simple business concepts of assets, capital and the like.

Ken Makovsky, President of Makovsky and Co., a PR firm, has posted a blog calling for a new educational initiative for PR students that separates it from communications and puts a heavy emphasis on business studies. I applaud Ken's perspective. The issue for educators, however, is how to provide the needed business courses. In some schools, communications schools hire in adjunct business faculty. However, most try to impose upon the business schools to provide the needed courses. As business schools get more crowded, they cannot accomodate the communications majors, and so the vicious cycle continues.

Something has to change and soon. The industry and the external environment is changing. While education is slow to change, one has to wonder how long communications education will be via

Saturday, June 14, 2008

Exxon's Got To Be Kidding!!

I just finished watching a TV commercial with Exxon touting its environmental and "green" concerns. Are they kidding!!! Here is a company that not only caused and never really came to grips with the greatest environmental incident in US history--the Exxon Valdez disaster in Alaska--but also is facing a proxy fight by Rockefeller family members over the company's lack of progress on moving beyond petrocarbons.

Facing an increasingly hostile public concerning gas prices and the Rockefeller family fight with the board, what does the company do? It tries to spin its way out of the issues and into the public's good graces. This is not only disengenuous, but it also is a disgrace to all companies that really try to change and cannot do it effectively or quickly enough.

Exxon has not changed and has no intention of changing. It is one of the only oil companies that has admittedly focused almost its entire strategy on oil. It has not significantly invested in new technologies, especially when compared to competitors like BP, Shell, and others. Exxon is making huge profits from the current oil crisis and has not invested in change.

If one were to listen to the Exxon commercials, one would believe that the company is focusing on new technologies like "hydrogen cars" and "freeing us from dependence on oil". All of these efforts are very long term. Nothing Exxon talks about addresses changing the whole nature of what constitutes an oil company to fit the needs of today's market. BP is adapting itself; so its Royal Dutch Shell. Exxon remains an "oil company". As the British would say, "full stop".

I am embarrassed when I watch these ads. I am not embarrassed for Exxon. They have proven that they are beyond being able to be embarrassed. They may actually believe their own lies. I am more embarrassed for other oil companies that are trying to be different. The tainted "paintbrush" of Exxon is a wide "brushstroke". Everyone is tainted. No one will be believed because Exxon has decided that the best way to address the myriad of problems it faces is to try to spin itself into a better reputation. This will prove unsuccessful and will hurt all others in the industry.

Saturday, May 24, 2008

Can Governance Help Boost Reputation?

Among the things I am most proud of is my co-founding of The Directors College in Canada, a joint program of the DeGroote School of Business at McMaster University and the Conference Board of Canada. This is the only program in the world that rewards successful graduates with a diploma as a certified corporate director. To attain the diploma, students must complete four modules (two-days each) and then take (or write as they refer to it in Canada) a rigorous exam. Not all pass, but hundreds have.

From the more than 10-years I lived in Canada, I was able to see the difference that exists between the U.S. view of governance and that adopted by most of the rest of the world. The U.S. has taken a "rules based" approach, led by the Sarbanes-Oxley legislation that dictates certain accounting standards to build greater transparency for shareholders. The rest of the world has adopted a "principles based" approach, which sets few legislative regulations, but rather provides for guidelines for companies seeking to enhance their governance. Each works well. The U.S. approach works best for those who break the law. There are clear ways to punish those people with fines and jail time. The non-U.S. approach is best for companies that seek to do better than the legal standards.

As an example, many governance experts in both the U.S. and in other countries have encouraged companies to split the role of chairman and CEO. Few U.S. companies have done this; many companies outside of the U.S. have. It is fairly typical in Canada to have a non-executive CEO, and this advances governance because the CEO is regularly reviewed by the board rather than running the board.

The resistance to separate chair and CEO roles is just one examples of how many companies in the U.S. will only adopt governance standards that are within the legal guidelines and will not adopt a more principles-based approach that might raise the bar for themselves and others.

In my teaching in The Directors College, I found directors in Canada much more willing to look at areas like reputation and human resources where they might want to get involved in monitoring and reviewing how management is handling things. We encouraged directors to ask the CEO for regular reviews of the management team, so that board is comfortable that the senior leaders of the company are exhibiting the right leadership ethics and responsibility. I find this a difficult issue to get directors in the U.S. to care about.

I wonder at times if the rules-based approach just keeps companies "on the road", while the principles-based approach "makes them better, performance drivers". A good driver knows the rules of the road, how to stay in his/her lane, the speed limits, etc. In contrast, someone who goes on to be a better driver, knows a bit more, including how to maintain one's car, deal with unexpected occurrences, etc.

Simply meeting Sarbanes-Oxley standards in critical but doesn't make one company better than any other. I think that the goal of companies is to be "disproportionately valued". To get to this goal, companies must do things disproportionately better than their competitors. Going beyond the rules-based governance standards may be one more way for companies to be better than others.

Thursday, May 22, 2008

Create and Foster an Employee Brand for Greater Value

There have been numerous studies that have found that employee and customer satisfaction are linked and that together they drive financial value. However, Professors Mjken Schltz and Mary Jo Hatch found that 90% of the employees they surveyed at various companies did not understand the company's brand and 70% weren't committed to supporting it even if they did understand it.

The findings by Schultz and Hatch are troubling on a number of fronts. First, it suggests that companies are not informing their employees about their desired brand, and second that even if they are telling employees something about their plans, they are not providing employees with the ability to help the company achieve its brand objectives. What a waste!!! With all the lip-service given by organizations to employees being "their most important asset", it is evident that most organizations still think of the employee asset in the same way they think of physical and financial assets--a tangible asset or cost to the company.

Employees are the most important asset a company has because of the intangible asset they represent. Employees who are informed, committed and energized can not only deliver on the brand promise, but they can help transform the customer experience from one that is good to one that is exceptional, thereby making the company "disproportionately valued" by customers.

At a recent talk meeting I attended, Harold Burson, founding chairman of Burson-Marsteller, referenced a conversation he had with a CEO who asked him who his most important stakeholder was. Burson noted that it was the employees, because every day they were the represenative of the company's reputation for those outside the company.

I once had the opportunity to review the brand advertising plans of a major company. I told the head of marketing that I thought that the ads were excellent. They changed my view of the company. I then made a statement and asked a simple question. "These ads make a promise that you are a new company, with a new commitment to serving your customer. Are your employees properly informed and trained to be able to deliver this promise so that the customer experience will be as you claim it will be? The answer is what I had expected. The company had not spent one minute training employees. They had not even informed employees of these new ads and the new brand strategy. I was asked what I suggested should be done. I recommended that the ads be put on the shelf and held until the company was certain that emplooyees both understood the brand, were committed to it, and were able to deliver it consistently.

I know that I repeat myself in many of these blogs, but I find it incredible how many companies do not understand that brand starts with employees. We have to have an employee brand to attract and keep our top talent, but the employee brand also must be connected with the product and service brands of the company to create the corporate brand. It is only when product, service and employee brands are integrated that we can hope to achieve the consistent behaviors to go along with our communications activities. The vast majority of what reputation is built on is the behavior of the company, not its words. When will more companies come to understand this?

Wednesday, May 21, 2008

Can Corporate Brand Management Be the Way to Real Values?

The new document from the Arthur Page Society entitled "The Authentic Enterprise" is a remarkably good piece that is designed to spark a dialogue about the changes going on tha impact corporations and the changing roles and responsibilities of the Chief Communications Officer. A key focus on the document is on values and the role of the CCO in helping to lead the company toward an identification of its core values.

I responded recently to a blog on the Arthur Page Society's website (, in which Roger Bolton, formerly the CCO at Aetna talked about his role as the leader in the definition of the "Aetna Way". I suggested that I believed that companies with solid values were those who respond well in times of crisis versus those who only gave their values lip-service.

It is only in about the last 20 years that companies have given so much concern to crafting "values statements". Such statements were spurred on by consulting firms, but many organizations adopted them mainly as ways to "speak to their values" and gave little real focus to how they might actually "live the values".

Bill Nielsen, former head of communications (CCO) at Johnson & Johnson gave a speech last year in which he quoted President Lincoln who said that reputation was like the shadow of a tree. The tree was the reality, the shadow was like reputation. Bill noted that company's need to "fertilize the tree rather than the shadow". Well said, but what does this really mean and how do companies do it?

Rather than spending so much time on the words of value statements, companies should instead focus on what business they're in, what they stand for, vis-a-vis their stakeholders, and how they see their responsibilities to these stakeholders. The famous J&J Credo, a true statement of values, was written when J&J was getting ready to go public. General Johnson wanted investors to know what kind of company they would be investing in. In essence, J&J was putting forth its brand promise and assuring that there were no surprises between the promise and the experience by investors.

This is an important concept for companies to adopt. Rather than trying to mimic the J&J credo, they neek to be true to themselves, i.e., "authentic". The organization needs to define its core values, its attributes, and how it will behave and will not behave, including what businesses it will and will not enter. This is not a job for the writing of values statements, but rather the real job of corporate brand management, a process that focuses on all of these aspects. The new "second wave" of brand management, as Prof. Majken Schultz of Copenhagen Business School calls it, is not narrowly focused as brand management might have been in the past. It is integrated with and is used for the kinds of organizational change management needed to close the gap between organizational intent and behavior that is needed to become authentic with stakeholders.

Monday, May 19, 2008

A Good Corporate Reputation Starts with a Good Corporate Brand

Most communications professionals do not recognize that building a good reputation is directly linked to the relevance their corporate brand has with key stakeholders. Too often, public relations and communications professionals try distance themselves from the term brand, arguing that it is related to marketing and advertising and narrowly focused on products and customers. This is not and should not be the case.

Brand management should be focused on identifying the values and attributes of the organization that resonate with key stakeholders. Reputation management, which communications professionals often refer to as "being known for doing good", suggests correctly that reputation is a derivative of actions by the organization that are relevant with key stakeholders. In other words, reputation is a vote by stakeholders that the brand attributes are important and relevant to the stakeholder.

If reputation management is not linked to brand management, one risks trying to build reputation through corporate responsibility programs, which although important are tactics, not strategies. The only way external communications programs can work is if they are supported by the actions of the company, and that means that the company must have the values, be able to deliver consistently on its desired attributes, and be able to build relationships with its stakeholders.

On the other side of the wrong perceptions of brand and reputation management are those advertising and brand professionals who think that brand is related to logo, design changes or slogans alone. Those are simply symbols that should help illuminate and help build associations for the brand. But, we should always recognize that when we talk about building a brand or changing a brand, we are talking about identifying attributes and linking actions with communications. Both the PR and design perspectives often minimize the importance of linking the concepts of brand and reputation.

Thursday, May 15, 2008

Crisis Management is Not the Only Things We Can Learn from J&J's Handling of the Tylenol Crisis

Johnson & Johnson's handling of the Tylenol incident in 1982 is the stuff of legends. As the reader might recall, a "madman" laced Tylenol capsules with cyanide, killing 7 people in the Chicago area in October of that year. J&J has rightly one high praise for how quickly it acted, pulling all Tylenol from all stores in the U.S. within 4-days. Its handling of the crisis helped the company not only rebuild Tylenol's market share within 6-months when many people thought the product was dead, but it also secured people's trust in J&J as a company.

Clearly, J&J did everything right from a crisis communications perspective. They addressed the problem head-on, they were open and honest with the media and frantic customers, and they cared more about their ongoing relationship with customers than they did about the possibility of law suits and the short-term bottom line.

Juxtapose this against what happened in 2007 when Mattel toys that were made in China were found to have high quantities of lead. Mattel missed filing the required 24-hour report with the Consumer Products Safety Commission (CPSC), suffered a fine of over $1 million from the CPSC, and still took more than 6-weeks after that to file its full report. When Mattel's CEO finally went public, he placed the blame on the Chinese for poor manufacturing quality. He later had to go to China and publicly apologize to Chinese officials for his statements.

People who study crisis communications use J&J as the gold standard and offer up Mattel as another example of a company that missed the boat on properly handling its crisis. I'd like to offer a different take on what should be learned.

J&J acted the way it did because it lived by its Credo, a document that acts as a values and brand statement for the company. The then CEO of J&J, James Burke, met with his top executives twice a day as soon as the crisis hit. He used the Credo to question everyone as to what should be done. The Credo's first paragraph states that the company's first order of business is to maintain the trust of the doctors, nurses, mothers and fathers who use its products. Burke and his team recognized that if they did not live up to the Credo, it was of no value. It was the most severe test of the document and it helped the company do the right thing. It acted like a "constitution", guiding the organization when straight thinking might have been difficult. I can imagine how difficult it was to come to grips with the decision since it meant millions in lost inventory, sales and potentially opening the company to law suits, since the withdraw might be interpreted as an admission of guilt.

Like J&J, Mattel has a values and responsibility statement that is prominently displayed on its website. It speaks to its commitment to making products of the highest quality and safety specifications. However, when tested, Mattel demonstrated that its statement of values were merely words, not true guiding principles for the company to live by. By trying to shift blame to the Chinese, who clearly did make the products unsafely, they failed to recognize that one can outsource manufacturing, but one cannot outsource reputation. Mattel owned those Chinese manufacturing plants in an intangible way, even though they may not have appeared on the balance sheet.

I am coming to believe more and more that companies with good reputations have them because they have a set of underlying values that guide their behavior. These values do not allow them to attempt to spin their way out of problems. They deal with them honestly and openly; they get through them and reinforce the trust that customers placed in them before. In fact, that trust is enhanced because they have proved their trustworthiness with their actions. That's the real message of the Tylenol incident that other companies should really pay attention to.

Thursday, April 3, 2008

The Reputation Difficulties for Consumer Products Companies

Unilever, one of the largest consumer products companies in the world, is under attack. A group calling itself Citizens for Commercial Free Children (CCFC), began a campaign in October 2007 claiming that Unilever was hypocrical because it was running Dove and Axe campaigns at the same time. Both are products of Unilever. Dove launched a program called "Onslaught" which urged parents of girls to talk to their children before the fashion and cosmetics industry does.

Dove decided to do something when research discovered that most women had a poor body image and tended to compare themselves poorly against the beauty images held up as desirable by the media. Dove ads show a normal looking woman before and then after make-up that would be applied to a model. The results are remarkable. There also are ads showing women of different sizes and ages, noting that beauty is not limited by body shape or age.

The Axe ads are totally different. In the ads, young men spray themselves with Axe, a body deodorant, and are immediately set upon by beautiful women who cannot constrain themselves after smelling Axe. The web-stie ads are really "over the top", with a group of women called Bom Chicka Wah Wah, that sing about raising ones labido and dropping inhibitions.

The CCFC feels that Unilever is hypocrical because it tries to raise the level of womens' feelings about themselves with Dove, and then sterotypes women in the Axe commercials. Unilver has responded that it has many products, all of which are targeted at different audiences, and the Axe commercials are meant to be a spoof and not to be taken seriously. The CCFC was not satisfied with the response.

This situation highlights a real problem with companies like Unilever that follow a "house of brands" approach to branding. Each product division has responsibility for its own marketing and communications. The name Unilever is never used on any product, and only appears on packages to the extent legally required.

Companies that are organized like Unilever (e.g., Procter & Gamble), face a real dilemma. They can put in place corporate reviews and restrictions on their divisions, or they can allow each division to conduct its own marketing and communications campaign. However, as this case has shown, it is easier than ever for a group to bring the corporation into the fray and demand that there be corporate-wide rather than product-line standards.

I did a case study on this situation with the students in my Corporate Brand and Reputation Management class. They were really torn about what Unilever might be able to do to rectify the situation. They recognized and appreciated the CCFC's complaints, but also thought that Unilever's position was justified. There was a sense among the students that Axe might have gone a bit too far in its web-site ads and that toning these down would help.

Reputation is a difficult thing for companies to manage and still balance the needs to drive sales. It is all the more difficult for consumer products companies that give responsibility for all marketing and communications to their product line management with few limitations. Johnson & Johnson, which is primarily a consumer products company, although it is known as a pharmaceutical company, puts parameters of responsibility on its business units through its "Credo". Perhaps companies like Unilever should begin to instill a sense of shared values throughout all of its business lines, as does J&J. It would still give the product lines freedom. However, as the old saying goes, freedom without some restrictions is chaos.

Thursday, February 28, 2008

What Audi Doesn't Understand and Acura Does

One of the core components of brand and corporate reputation is customer service, yet many companies fail to fully provide the level of service to match their high-priced brands. In the auto industry, the issue has often been the distribution relationship between the manufacturer and the dealer which leaves the dealer in charge of the brand in relation to the customer.

My wife leased a 2007 Audi A4 two years ago and almost immediately began having problems with the navigation system. She took the car back to the dealer 5 times and each time they said they had fixed the system, but it still did not work properly. Finally, I wrote to the president of Audi US, who forwarded my letter of complaint to a regional service manager to handle the problem. To say that the regional service manager was a low-level complaint department with no ability or authority to properly deal with the problem would be a bit of an understatement. Having lived much of my adult life in the corporate world, I could tell from my numerous telephone coversations with him that he was unable to solve our problem, even if he were willing to do so. But, because he had so little knowledge of customer relationship management, any appeal to his sense of marketing, brand and reputation management failed to make even a dent.

He suggested that we bring the car into yet another dealer for checking the system. I commented that after 5 tries we were more than a bit frustrated with that route and that the company should replace the system. He refused to do that and said he had no authority to make such an offer. He suggested that we could order a new software package and download it ourselves. We found this offer unsatisfactory. After several very frustrating telephone conversations and letters back and forth, we decided that our best course of action would be to wait out the 2-year lease and get rid of the car.

When my wife finally returned the car to another dealer, she asked if her experience was typical. The gentleman at the dealership said: "I shouldn't be bad-mouthing my company, but this is the way Audi treats customers". He gave us a few other examples in which Audi would not stand behind its product and service was short-changed.

Now, let's juxtipose this against my own personal experience with Acura. I own an MDX, which I bought in 2005. A few months ago, I started to have some problems with my navigation system. I took it in for service. I got a call from the dealer who said that my system was acting up for them as well and that they thought that I should get a new software package installed. The normal cost would be $285, but they had gotten Acura to agree to pick up the cost. Situation solved. Customer happy. Loyalty to the dealer and Acura secured.

After my wife turned in her Audi, she bought a new car. Guess what she bought? She got an 2008 Acura TL from the dealer who had been so good to me.

The morale of this story is so simple that it is amazing to me that every company does not fully understand it. When dealing with high-priced, high-quality brands, one must understand that customer service is an integral part of the total brand experience. Selling a car is not like selling Coke. A can of Coke costs a dollar or two and has a usage life of a few minutes. Cars are expensive and have usage lives of years. The management of the brand cannot, like a Coke, stop at consumption. In fact, even Coke realizes how to enliven the brand experience to create return customers. Audi's customer service and brand management were so poor that they can only serve as illustrations in this blog, to my clients and with my student of what not to do.

A few decades ago, Audi had a problem with its breaking system. At that time, its response was to blame U.S. drivers for not knowing how to drive high-performance European cars. The real fault, it was found, was an engineering problem. I guess the people running Audi still have not learned a sufficient lesson in how to handle customer service and what good brand and reputation management really mean.

Friday, February 8, 2008

Crisis Planning is Not Reputation Management

Whenever communications people talk about reputation management, the talk immediately turns to the subject of crisis management and how important it is to prepare the organization for a crisis.

Crisis managaement is to reputation management as fire fighting is to fire prevention. Crisis management is important and plans should be in place, but it is handling of an already existing problem. Reputation management should be a strategic process that gets everyone in management aligned on how to balance the needs and interests of all stakeholders so that reputation is enhanced and risk is minimized.

A good way to manage reputation in a complex organization is via the use of a Reputation Council. The Council brings together all of those in the organization responsible for "stakeholder relations". The membership would include communications, human resources, marketing, sales, government relations, investor affairs, and any other function that has responsibility for an important stakeholder of the company.

The Council would have as its objective the integration of the company's reputation efforts with regard to employees, customers, investors, media, government agencies, and all other stakeholders. The Council would all work from the same strategic guidelines and would share research, both that already on-hand, as well as that which is needed. It is amazing how often I have found that research done by one organization is not shared with other organizations.

Through such a Council, reputation can be managed as a holistic, strategic company-wide process. Crisis management would then take its rightful place as a tactic within the overall plan.

Wednesday, January 30, 2008

Some Basic Principles of Reputation

I have been attending a number of meetings at which a variety of people talk about reputation. It is interesting how liberally and non-specifically the term is used. It seems that many people suggest that simply doing good public relations or having good corporate advertising will create a good reputation.

The following are some basic principles which should provide guidance for those involved in corporate brand and reputation management that, I hope, will make the discussions increasingly more specific:

1.Brands and reputation are judged within a competitive set and each organization must differentiate from other offerings;

2.An organization needs to behave in trustworthy ways to earn trust and build reputation—communications alone will not do it;

3. Stakeholders decisions are made on specific, immediate needs, and these can change over time;

4.Not all stakeholders are equally important. You must have a way to prioritize stakeholder value and potential risk;

5.Stakeholders are increasingly defining brand(s) and reputation on-line;

6.The objective of brand and reputation management is to deliver measurable returns to your organization.

I will be posting more specific suggestions that elaborate on these principles in future blogs.