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!!!

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.

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.

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

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.

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.

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?