Integrity – Surviving a Crisis

14 September 2009

It is a commonplace of communications that for an organization and its senior management to survive a crisis, at least with its reputation relatively intact, it should act with integrity. But what does integrity mean in these circumstances?

There are a multitude of complex compliance models of integrity such as the one appended here and used by the pharmaceutical company Novartis at “Citizenship@Novartis” to guide its corporate responsiblity program.

Impressive, yes, but impractical as a guide to behaviour when an organization and a CEO’s back are to the wall and decisions about what to say and when to say it have to be made in a moment.

Michael Jensen, founder and co-chairman of the Social Science Research Network and a professor emeritus at Harvard Business School, thinks of integrity (“what it takes for a person to be whole and complete”) as honouring your word:

We can honour our word in one of two ways: first, by keeping our word, and on time as promised; or second, as soon as we know we can’t keep our word, we inform all parties involved and clean up any mess that we’ve caused in their lives. When we do this, we are honouring our word despite having not kept it, and we have maintained our integrity.

(Note the reference is from an article in the Fall 2009 issue of the Rotman School of Management magazine which is not available online.)

Not bad advice for an organization or CEO troubled by a crisis of reputation: Inform everyone affected about what’s going on: Recognize the mess you’ve caused; Clean it up.

 

Hubris and the CEO: A Cautionary Tale

03 September 2009

Wikipedia defines hubris as indicating “overweening pride, superciliousness, or arrogance, often resulting in fatal retribution or Nemesis”. Hubris is an essential element of Shakesperean tragedy in which the protoganist over-steps divine or natural law and suffers for this pridefulness (Think Lear, Macbeth, Hamlet).

The whole idea came to mind watching the sad, and in this case possibly tragic (the words aren’t  synonymous), events surrounding the former Ontario attorney-general Michael Bryant who was involved this week in an altercation in which a cyclist was apparently killed by Mr. Bryant’s car.

It would be irresponsible to pass judgment on these events or on whether Mr. Bryant suffers from hubris. However, he has been the subject of a number of articles in the last few months in which he has been described, for example, as a “political rock star” with “an overstuffed closet full of accomplishments in which to drape himself: magna cum laude LLM from Harvard Law School, Fulbright Fellow, MPP at 33 and cabinet minister from 2003 until earlier this year.” He has been congratulated on his pricey wardrobe and described as “dapper” and “intense”.

Which means if he did listen to his own notices, to use the theatrical expression, it would not be surprising if he suffered from some sense of invincibility. And that, as the Greek tragedians would tell you, leads to retribution.

Turns out there is a recent study that suggests hubris and its retributive consequences were also present in CEOs who were found to have committed fraud.

Thanks to a blog for institutional investors called Pom Talk I was directed to a recent Canadian study titled Like Moths Attracted to Flames: Managerial Hubris and Financial Reporting Frauds. In it Michel Magnan of Concordia University in Montreal, Denis Cormier of UQAM and Pascale Lapointe-Antunes of Brock University suggest

“Taking a look at the size of management’s ego as a possible indicator of fraud. . . the authors suggest that egotistical managers, stoked by media attention and analyst praise, gain a ‘feeling of invincibility’ that leads them to ‘take more risks in fraudulent activities,’ akin to the ‘moths attracted to the flames that ultimately kill them.’  The study also suggests that ‘managerial hubris… ignites and accelerates the propensity of senior executives to commit or to be oblivious to fraud’ and thus may just be the red flag that can effectively weed out the truly fraudulent operations from the non-fraudulent.  The authors opine that ‘inconsistencies between executives’ statements and observable facts or realities, outlandish claims, and a lack of concern for operational detail can be signals that managerial hubris has set in.’”

Since many in-house and agency communications professionals help manage their CEO’s public persona, and spend time urging reporters and bloggers to profile him or her, this is a cautionary report. Abetting journalists as they strain to make celebrities out of leaders, no matter how successful the person, has its risks. Too much stroking of the ego in public can lead to inspiring boldness . . . or reckless bravado. Let’s think twice about pumping up the boss. Humility today is a more constructive — and safer — virtue.

 

Reputation Key in FDI

01 September 2009

An analysis by Shawn McCarthy in Canada’s national newspaper The Globe and Mail of PetroChina Co. Ltd.’s investment in Canada’s oil sands (through an investment in Athabasca Oil Sands Corp.) makes this assertion:

Despite some concerns about PetroChina’s ultimate control resting in the hands of senior mandarins of China’s ruling Communist Party, the company will likely face little opposition from the federal government on this deal.

Just two weeks ago, Finance Minister Jim Flaherty was in Beijing and told officials that Canada welcomed commercial investments in resource development from Chinese companies, so long as they are subject to proper corporate governance.

It is indeed an important test of the Canadian government’s new guidelines for state-owned foreign direct investment. But broader public understanding of – and support for – foreign investment by offshore suitors would help the government along. For this to happen, these companies need to do a better job of making their case before announcing a deal. There are at least four things that should guide their reputation building strategies, assuming they care about public opinion:

  1. Being transparent and honest about their global business strategy
  2. Introducing their senior executives to the host country to temper mistrust
  3. Creating healthy sources of information online about the company, its management and its investment and operational track record
  4. Committing to integrity and openness in corporate governance and providing evidence of this  commitment through a world-class and defensible code of business conduct

The alternative is to hope the host government will not experience, or will ignore, public doubt or opposition. And with any elected government that is always a questionable proposition no matter its ideological commitment to foreign investment.

Future of Newspapers – Debate Rages (?)

14 August 2009

Debate about the future of newspapers won’t die for some time yet I think . . . at least among journalists, news media watchers, some bloggers and Clay Shirky.

Roy Greenslade on Greenslade Blog wrote this week on newspapers and magazines charging for their online content. Greenslade’s title alone raises the key question: "Paid content is all the rage with US publishers – but where’s the proof that anyone will pay?"

I chuckled over the comment from Steven Brill, founder of Journalism Online, in the piece that JO "has helped shift the debate over charging for online news from ‘if’ to ‘when and how’" because beleaguered publishers have moved past the "abstract debate" to agree that paid content is the way ahead." (JO’s goal is to help them get there.)

Now there’s a shock right? Publishers think the solution to declining print revenues is to charge people for accessing onlne content.

Megan McArdlein The Atlantic online framed the debate marvellously this way "The problem besetting newspapers is not that there are hordes of bloggers giving it away for free . . . Even if every newspaper and magazine in the country entered into a binding cartel agreement not to put more than a smidgen of free content on their websites, newspapers would still be losing money, and closing by the dozens.  It’s the economics, stupid . . . We’re witnessing the death of a business model."

So how exactly is pushing people to pay for online content recognizing, as people like Shirky and McArdle (and dozens of others) have been rightly trying to point out, that the paid online content model which has been tried many times before will not revive the fortunes of "old" media.

CR Blogs & Websites

21 July 2009

One of the more tangible of intangible assets is a company’s corporate responsibility (CR) program. Since I consult with a number of companies and organizations on these programs, I try to stay current on new ideas and points of view.

I was in the middle of writing about the sites and blogs I use to try to stay current when a colleague pointed out I had been scooped by Chris Jarvis at Fast Company in a post on the top ten sites which encourage conversation about social media and CSR

There are some overlaps between my list and his (Just Means and Taking It Global) but here are a couple more smart websites and blogs tagged in my RSS reader. I also follow a few Twitter ‘friends’ who direct me to useful CR and sustainability studies and reports.

Here are some of the most valuable . . . to me at least:

Please post a comment if you have others to recommend.

Newcastle United – How NOT to Manage Reputation

16 July 2009

Newcastle United FC is a storied franchise in English football and ‘my club’ in the sense that I was born a Geordie (the name used to describe people from the northeast of England) and therefore am genetically predisposed to being a member of The Toon Army, as frustrating as that can be. My father (long deceased) was a friend of one of the team’s legends, Jackie Milburn (‘Wor Jackie’ as he is known), from when they both lived in Ashington in the 1940s.

This past season was a disaster for the club, with managers changing three times during a 38-game season and poor performances on the field by highly paid "stars’. The result is an ignominious demotion to the Coca-Cola Championship from the Barclays Premier League (where such other well-known franchises as Manchester United, Chelsea, Arsenal and Liverpool play).

The owner — Mike Ashley, who has been problematic, if not a disaster, from the beginning according to most reports — has been trying to sell the club since at least the last day of the Premiership season. It is now being coached by an interim manager.The players are furious and many of the first string players are asking for transfers. Even Ashley admits he has made a mess of things: “It has been catastrophic for everybody. I’ve lost my money and I’ve made terrible decisions. Now I want to sell it as soon as I can."

I have watched the public relations calamity unfold online on an almost daily basis through news reports from British newspapers and the NUFC’s website (which tends to report absolutely zilch about what is going on). The extraordinary thing is that management appears to be saying naught. News reports are based almost exclusively on comments by players or "sources’ close to the club.

From what I can tell, management has said nothing to reassure the city of Newcastle nor the club’s extraordinarily devoted fans that the coming season in the lower division will be nothing short of a debacle. No reassurances are being given; no sympathy expressed; no plans outlined; no time frames given; no deadlines offered . . . in other words, completely counter to basic crisis communications principles.

Okay, maybe management doesn’t see the situation as a crisis. Maybe management’s solicitors or investment bankers have said it must say nothing. Maybe it is sending out news updates that no news outlet is picking up. Maybe it has a social network, YouTube channel, blog or Twitter presence which I just haven’t been able to find. Or maybe management simply doesn’t recognize the damage that is being done to its reputation.

The supporters will be there for the players on the pitch when the dust settles: but when Geordies are called on to support an NUFC management business initiative, when the city is asked for a concession or a tax, or when the club’s history is written, who will be there to defend management’s interest and its "license to operate" the Geordies’ club?

Social Media and News Miscellany

12 June 2009

Lots of juicy factoids and information today that add a little more to my thinking on new communication memes:

  • Twitter_logo_header Of the many striking statistics in a report called ‘Inside Twitter‘ out of Canada’s Sysomos people, this one stands out for evidence of the sheer stupidity of the hordes who now call themselves  ’social media consultants’: “Of people who identify themselves as social media marketers, 65.5% have never posted an update (on Twitter).” I guess they just can’t be bothered . . . or don’t have time?

  • To be filed under the tab ‘Public Relations Through the Rear View Mirror’, according to an article today in the Ottawa Citizen Canada’s National Defence HQ has a new ‘conduit’ approach to public relations (in which all media questions are funneled through public affairs staff, with the journalist never allowed to speak to a subject matter expert directly) that the writer calls the 24 DAY news cycle: “Into this brave new world of hyper-speed news gathering, NDHQ has rolled out what I’ve termed, the 24-day news cycle. Yes, 24 days…..That’s about the length of time I figure that it takes NDHQto answer a question from the news media…..if it is answered at all.”
  • Bear with me on this one. Those who follow me on Twitter will know that as a native ‘Geordie’ I am an ardent — and frustrated, some would say foolish — supporter of the Newcastle United football club, formerly of the English Premier League now relegated to tier two football as a result of an abysmal season this past year. Thankfully, the owner has put the club up for sale (at 0,,10278~3488677,00 about US$200 million). Before he did so, he published a statement in which he said “I’m sorry” about four or five times. Frankly, it sounded hollow given Ashley’s unwillingness to invest in the club and his lack of commitment to its success in spite of having one of the most loyal fan bases of any football club. The lesson here is simple . . . saying ‘Im sorry’ in a crisis is not enough. An apology has to be backed up by action to resolve the underlying problem. In this case, the owner getting out is the right move, although that is not counsel I would give to many CEOs.
  • Finally, this about philanthropic giving . . . “Today, the Committee Encouraging Corporate Philanthropy (CECP) shares a first-look at results from its annual philanthropy survey of nearly 140 leading companies, revealing that 53% of companies increased their total philanthropic donations in 2008, and 27% increased their giving by more than 10% year-over-year.” So things are not as bad as the CR critics would have us believe.

Reputation Risk and Water

01 June 2009

Reputation risk for companies is an underestimated consequence of global concern about climate change. Rather than expending more inventive energy on denying a relationship between CO2 concentrations and global temperature, smart businesses should be looking for ways to gain come reputation capital by managing climate change risks in cooperation with communities and global agencies.

Last week, the UN Global Compact and the Pacific Institute released a short paper on climate change and its impact on water which recommends a number of sensible management strategies. The context for the paper is the statement that:

“There is overwhelming scientific evidence that burning fossil fuels has altered the chemistry of the atmosphere. Figure 1 shows that atmospheric CO2 concentrations are reaching levels that are likely higher than in the last 20 million years.Rising CO2 concentrations along with other greenhouse gases (GHG) are changing the planet’s climate. Global mean temperatures have increased three-quarters of a degree Celsius since 1900 and 11 of the 12 warmest years since 1850 have occurred since 1996.These climatic changes are expected to accelerate over the coming decades.”

The paper argues that a significant body of scientific evidence suggests climate change will affect the scarcity, sustainability and quality of the global water supply, which increases business risk, especially with respect to energy supply management, raw material inventories, industrial production systems and the associated financing costs.

Reputation risks can easily follow, for example as “people become more aware of their rights to access water . . . local businesses may find themselves using copious amounts of water in regions where people lack sufficient water to meet basic needs.”

The paper outlines some business strategies which mirror two dominant themes on how businesses today need to think of corporate responsibility (CR): CR as part of business strategy discussions (integrating “water and climate change into strategic business planning and operational activities”) and engagement of stakeholders in responsible planning (engaging “key stakeholders as a part of water and climate risk assessment, long-term planning and implementation activities”).

Reasons to Feel Uneasy or Exhilarated

31 May 2009

Philip Sheppard, a past president of the International Public Relations Association, brought to my attention this exhilarating and numbing video called Did You KNow? posted on the Pilot Theatre (from Wakefield West Yorkshire) website . . . Lots to make you think about business, communications, knowledge management and North American education (strengths and failures).

Restoring Reputation

27 May 2009

The stock of CSX Corp., a Jacksonville Florida-based railway company has been discounted as a result of lingering criticism of “poor management”, according to UBS analyst Rick Paterson as reported today in the Financial Post. (I can’t find a link: The Financial Post’s website doesn’t make it easy.) It should be trading at a premium to its competitors according to Paterson.

He goes on to say “Four or five years ago that (“poor management”) was probably true, but we think these days are long gone and (mis)perception is lagging reality.”

If that’s the case (and I have no idea if the company has been actively trying to restore its reputation), then why is it that investment bankers and equity analysts stubbornly resist the idea that a good reputation, consciously developed, nurtured and communicated, can have a measurable impact on valuation? And why is it that some companies have such a hard time understanding that reputations don’t recover solely through solid financial performance?

There are strategies for reputation recovery. But they require commitment, humility and honesty . . . and the support of financial advisers, lenders and legal counsel.