Crisis Musings

… About how profound a crisis Toyota is facing, that question was answered Saturday morning.  My three sons were sitting at the kitchen table eating breakfast.  CNN was on the in the background, and evidently there was a report on the Toyota recall.  Suddenly my 8-year-old announces, “Toyota is the worst car.“

Of course it isn’t, but if we have reached the point where the Toyota recall has gotten the attention of elementary school children, then that is a fairly good indicator of how deep this is now embedded in the American psyche.

As I speak to more reporters, it’s time for me to update the Q&As from my prior posting:

1.  Has Toyota’s apology been effective?

First of all, beauty is in the eye of the beholder.  So that is a question best posed to Toyota’s customers and shareholders.  But generally speaking, apologies have limited value.  The published apology or expression of regret is now part of the mandatory playbook for companies in crisis.  Companies are expected to do it (and criticized if they don’t), but they don’t win many points for it.  The apology is to the corporate world what the admission of a drinking problem is to the alcoholic.  It’s necessary, but alone doesn’t mean much.  What is far more important for both the company in crisis and the alcoholic is the performance and behavior company going forward.

 2.  Why has this become such a big story?

 There are several reasons for this.  First, the sheer size of the recall.  Second, the unusual step that Toyota made in suspending product sales.  That’s not something one typically sees in a recall.  Third, that Toyota didn’t yet have a fix in place at the time in announced the recall.  And, perhaps most important — Toyota’s own reputation for quality and safety was its own undoing.  Were this to have occurred to another car company not known for quality and safety, the reaction may not have been severe.  The lesson for companies here is that they must work to maintain a balance between the reputation they aspire to and the products and services they sell.

 3.  Has the fact that this is a Japanese company affected how the crisis has evolved?

 It is certainly a question worth exploring.  Jeff Kingston, director of Asian Studies at Temple University Japan, put it this way in an op-ed in last Saturday’s Wall Street Journal (”A Crisis Made in Japan,” Feb. 6):

 “It is not surprising that Toyota’s response has been dilatory and inept, because crisis management in Japan is grossly undeveloped. Over the past two decades, I cannot think of one instance where a Japanese company has done a good job managing a crisis. The pattern is all too familiar, typically involving slow initial response, minimizing the problem, foot dragging on the product recall, poor communication with the public about the problem and too little compassion and concern for consumers adversely affected by the product. Whether it’s exploding televisions, fire-prone appliances, tainted milk or false labeling, in case after case companies have shortchanged their customers by shirking responsibility until the accumulated evidence forces belated disclosure and recognition of culpability…

“Japanese firms often seek to cover up or fudge the facts and the people communicating with the media and public often do not have the information they need to do their job. The absence of a structure to quickly get accurate information to top management hampers an accurate and adequate response. That leaves management unprepared to deal with media questioning and conveys an image of stonewalling and indifference.

“There is a cultural element to this penchant for mismanaging crisis. The shame and embarrassment of owning up to product defects in a nation obsessed with craftsmanship and quality raises the bar on disclosure and assuming responsibility. And a high-status company like Toyota has much to lose since its corporate face is at stake. The shame of producing defective cars is supposed to be other firms’ problems, not Toyota’s, and the ongoing PR disaster reveals just how unprepared the company is for crisis management and how embarrassed it is. In addition, employees’ identities are closely tied to their company’s image, and loyalty to the firm overrides concerns about consumers.

“There is also a culture of deference inside corporations that makes it hard for those lower in the hierarchy to question their superiors or inform them about problems. The focus on consensus and group is an asset in building teamwork, but also can make it hard to challenge what has been decided or designed. Such cultural inclinations are not unknown elsewhere around the world, but they are exceptionally powerful within Japanese corporate culture and constitute significant impediments to averting and responding to a crisis.”

 Companies — whether Japanese or not — ought to do some soul-searching to determine whether their culture, their management style, their policies and systems will enable them to effectively manage a global crisis in today’s environment.

 4.  What can we expect next?

 Crises such as this follow a very predictable trajectory, as I pointed out in my prior posting.  The Toyota recall is no different.  However, as a media event I think we will soon reach a saturation point and media will move on to other issues, either because of fatigue (the media are notorious for their A-D-D), or because a new story emerges.  But the fact that the story disappears from the front pages should not be seen as an indication the crisis is over.  It just means it is time to turn the lemons into lemonade.

What do you get when you combine Three Mile Island, Exxon Valdez, Tylenol, Peanut Corporation of America and just about any other high-profile crisis?  Answer:  Toyota.

We can officially declare the Toyota Recall to be the crisis of this young decade (until another one comes along… and it will.)

This is the perfect storm… One of the world’s leading carmakers, its reputation built around safety and quality; a media community desperate to demonstrate it is still relevant; regulators falling over each other to show the world they are the stewards of public safety; a global company struggling to keep up with the pressures of a global marketplace and the lightning speed at which information now moves; a public that has absolutely no faith in any institution (particularly car companies and politicians), whose nerves are raw and which is now empowered by social media.

I’ve done a number of media interviews over the past week.  Most every reporter asks me the same questions.

1.  How is Toyota doing?

2. Can Toyota recover?

3.  What comes next?

In response to #1, I say it is too soon to tell.  It’s easy to judge companies on the tactics they employ — apologies, letters, websites, etc.  But at its core this is a BUSINESS problem first, and a REPUTATION problem second.  A smart and prompt fix to the business problem is far more effective than compelling communications.  There are plenty of metrics that can be tracked to determine how the company is faring — sales, resales, customer satisfaction data, earnings, etc. (But right now it doesn’t appear that Toyota has a smart and prompt fix, nor compelling communications.)

To Q2 my answer is “sure,” but there will be a new normal.  Bridgestone/Firestone recovered, but the crisis will never be forgotten (not in this Google world).  Exxon recovered, but its name will forever be linked with Valdez.  Tiger Woods will recover, but he will never be viewed in the same light again.

To Q3, I tell reporters that this crisis is running a very predictable trajectory.  One that is similar to most other corporate or product crises.  And because it is on a familiar path, one can predict with relative certainty what will come next:  

The announcement of the recall is initially met by straightforward media coverage in the first 12-24 hours, but all hell breaks loose after that:  personal stories of drivers who had problems… lots of internet chatter… reporters doing the “how are they managing the crisis?” analysis… politicians jumping on the bandwagon… people start asking, “what did they know, and when did they know it?”… Trial lawyers chumming for clients to file class actions… copycat events (problems with other models, or with competitors’ models)… the company announces the financial impact of the event… hearings… Ultimately the media and public lose interest as fatigue sets in or they move on to another crisis.

But an examination of corporate crises over the past decade will bear out this pattern.

SO WHAT ARE THE LESSONS FOR REPUTATION MANAGERS WHEN FACING SUCH A CRISIS?

1.     Try to regain control of the agenda as quickly as possible.  Easier said than done, to be sure, but so long as others are driving the conversation (pardon the pun), companies will be in a reactive mode.

2.    Understand the speed at which information now moves, and adjust to it.  The time allowed to make decisions is now measured in minutes, not hours or days.

3.    Anticipate the trajectory of the situation, and plan for it.

4.    Connect with your audience emotionally.  Fear and anxiety are far more powerful than reason.  You won’t get very far in connecting with people rationally until you can address peoples’ emotions.

AND WHILE I’M ON THE SUBJECT…

I was reading an article in the Wall Street Journal yesterday on a very different topic – the decision by the medical journal, LANCET, to retract a study it had published in 1998 suggesting a link between vaccines and autism.

That single study prompted a heated, emotional and long-running debate among parents and physicians over whether such a link existed, whether children are facing a greater risk by not getting vaccines, and so forth.

What does this have to do with gas pedals?

A physician, Dr. Paul Offit of Children’s Hospital of Philadelphia, was quoted in the WSJ article:

“It’s very easy to scare people; it’s very hard to unscare them.”

That single statement best captures the conundrum facing companies – whether they are car manufacturers, pharmaceuticals, food processors, airlines or any other consumer-facing company.  Once the notion of fear is introduced to consumers, it is damn-near impossible to erase it, even if the notion is ultimately discredited.  This is something that media, politicians (Ray LaHood??) and consumer groups should keep in mind as they consider weighing in on such an issue.

Am I suggesting that the Toyota recall issue is overblown?  No.  But I have seem very little data presented to show the number of accidents caused by the faulty accelerator pedals as a percentage of the total number of cars on the road.  Such data is far more important than anecdotal personal stories that have not been verified, and which indeed may be promoted by a trial lawyer with a vested interest in a cash settlement.

The Toyota recall is big for several reasons:

1.    Scale.  Not only is Toyota among the largest car companies in the world, but also so many models are affected.

2.    It seems to be blossoming… Now separate and unrelated problems are becoming apparent with other models.

3.    The irony of a company that built its reputation on safety and quality, finding itself having to apologize for lapses in safety and quality.

Enough for now.  Stay tuned.  This crisis has not yet reached its apogee.

It was 25 years ago that Coca-Cola launched “New Coke,” which quickly entered the annals of history as a collosal business mistake.

Today we may be witnessing a similar blunder with NBC’s ham-handed handling of the Leno-O’Brien-Fallon trio of talk show hosts.

And while it remains to others to judge whether the Leno prime-time experiment was a disaster or not, what is clear is that NBC’s handling of it certain is.

And herein lie some lessons for reputation managers.

While Coca-Cola took some deserved hits for rolling out a new product without really understanding what they were doing and the potential consequence, their response to that mistake was actually quite good.  They may not have turned the proverbial lemon into lemonade, but their handling of the aftermath of the New Coke roll-out was admirable.

And that is where there is a divergence with the Tonight Show experience.

NBC clearly wasn’t ready to handle the fall-out from it’s seemingly rushed decision to shuffle the chairs on the deck, and it is being pounded for it.  Worse so, because Leno and O’Brien enjoy the benefit of a pulpit from which they can take digs at their own employer, while NBC has to work through press releases and media interviews.

So what do we draw from this?

1. Here is another example of how companies are judged not for the problem they experience, but their handling of the problem.  Everybody knew that Jay Leno’s prime time show was a bit flat and expected the network to make some sort of change, but the “fire-ready-aim” approach employed by NBC has been more reminiscent of the Three Stooges than the well-oiled GE/NBC machine.
2. It is impossible to overstate the importance of building goodwill before you need to draw on it.  Leno and O’Brien have that goodwill; Jeff Zucker and NBC do not.
3. Don’t lose control of the agenda!  NBC did that when the media grabbed this before the network was ready (they originally said they’d deal with this AFTER the winter Olympic games), and NBC found itself in the position of playing catch-up to all the pundits (and it’s own hosts) chattering about this.

Looking back on the New Coke experience, we see that Coca-Cola executed the recovery better than the launch, possessed goodwill it could draw on, and regained control of the agenda.

At the end of the day, this Late Night debacle is terribly inconsequential; particularly in view of the current tragedy revealing itself in Haiti.  But it serves as an abject lesson for those of us who don’t want to become the next “New Coke.”

November 22, 2009

Lloyd Blankfein, Goldman Sachs’ chairman and CEO, may wish he never retrieved today’s New York Times from his driveway this morning.

On the heels of Blankfein’s apology last week for “things that were clearly wrong,” and pledge of $500 million to assist small businesses, the Times had not one, not two, but three pieces that dissected the banks actions in a not-so-favorable light.

·         “Taking Spin out for a Spin” – an analysis of the bank’s apology;

·         “Goldman’s Non-Apology” – an editorial; and

·         “Revisiting a Fed Waltz With A.I.G.” by Gretchen Morgenson in the Sunday Business section, which challenges Goldman’s assertions about the A.I.G. bailout and the federal funds it received as a counterparty through A.I.G.

Indeed, the media and bloggers are chattering away this week about Goldman’s apology, whether it was sincere, whether it worked and what Goldman’s true intentions are.

The central question the media seem to be asking is, “Will it work?”

Of, as I put it, does it pass the ‘So what?’ test?

But to get to the answer to that question, one has to pose another question:  “Who is Goldman trying to impress?”

Lawmakers?  The media?  The public?  Investors?  Employees?  Competitors?  Who???

I think one has to look at this from two perspectives. 

As a competitive move, it certainly puts the other banks in a tough spot, because it creates separation from the rest of the pack.  Being first is a coup.  From a competitive standpoint, this may be smart.  Everything done by others afterward will look like catch-up, unless it is larger by magnitudes, or more innovative. 

To be sure, the other banks are probably cursing Goldman for raising the bar, and legislators will likely be looking to the others and asking, “Well, where is your $500M mea culpa?”

But on the  broad question of whether this helps Goldman’s reputation with many of the stakeholders listed above, and whether this does anything to improve the lot of the sector, I’m not so sure.  This is nice, and it is productive, but juxtaposed against record Wall Street earnings, hideously outsized bonuses and the overhang of Madoff, Galleon, Dreier, etc, it won’t get them out of the doghouse.  Moreover, I don’t think anyone is convinced that the final shoe has dropped vis a vis Wall Street fraud, malfeasance, unethical behavior. 

In short, I don’t think people are yet convinced that there is any behavioral change that has accompanied the apology.  After all, people have been upset with the behavior of Wall Street (defined broadly to include investment banks, brokerages, mortgage lenders, etc.) and its share of responsibility for the current global recession.

Last year at this time I wrote on this blog in the topic of apologies:

Companies successfully work their way out of a problem because they address the problem, and not just the perception of the problem.  In other words, a business problem requires a business fix.  A letter of apology or regret published in a newspaper solves nothing.  And the fact that such a tactic is now seen as “required” in the PR tool kit diminishes its value even more, precisely because it is seen as required and thus not genuine.

In the context of the Goldman Sachs apology, I think these words still ring, and may explain the skepticism that it has received.

Goldman and its peers will be judged over time for their behavior far more than for their words or gifts.

When I first learned of the Blankfein apology and $500 million pledge (or, as the Times called it, “crumbs from its table”), the image I had in my mind was of the person who was just caught cheating, and who tries to make up for it with an apology, a vague admission of guilt, and an effort to buy-back the love of his spouse.  How much is enough?  Roses?  Dinner out?  Diamonds?

In Goldman’s case, there is no shortage of critics passing judgment on “how much is enough?”.  And from the looks of the initial reviews, that $500 million hasn’t bought Goldman even a week’s worth of goodwill.

If history is any indication of the future, it will require a sustained commitment, a reshaped culture and some fundamental change to get this monkey off their backs. 

So we give it time.  Maybe we should wait a year before answering the question, “Will it work?”

 # # #

I was having lunch recently with a client.   Through three years we’ve weathered several imminent threats to her company due to potentially explosive crisis situations. But none had materialized into a full-scale crisis.  As we finished our coffee, this client asked a thoughtful question.

“Is it possible to predict whether a situation will remain just a mere nuisance, or instead morph into a full-blown, pants-on-fire crisis?”

Why, in other words, do some situations escalate to crises while others do not, even though they seem to pose the same characteristics?

In fact, by examining various crises that have dominated headlines in recent years shows it’s possible to identify common combustion factors that can cause a matter to ignite.

And while there is rarely a single reason why a situation erupts into a Defcon 1 event, using the following factors should enable communications managers to predict with some degree of accuracy whether a situation holds the potential to escalate.

·         Is it real?  Of course, the first question to be asked is whether the situation poses a legitimate threat to the enterprise.  Think Lehman Brothers, GM or Countrywide Financial.  Their respective fates were not caused by a PR problem (although their mishandling of PR didn’t help).

·         A Clearly defined, tangible, measurable risk.  It is easier for the public and media to go hysterical over H1N1 or salmonella in the food supply than over the gradual threat of the icecaps melting due to climate change.  When the risk appears real rather than abstract, the issue has a greater likelihood of escalating.

·         A sympathetic victim or set of victims.  Cynical as it may sound, the media are far more interested in conflict where there is a vulnerable party.  Children, the elderly and animals are the most attractive to the media.  This is why scandals involving day care centers and nursing homes are so compelling.  It also explains why the Michael Vick/dog-fighting scandal captured far more headlines than it really deserved.  On the other hand, I read a news report last month of a gender discrimination lawsuit brought by a former senior communications executive at Anheuser-Busch.  This woman might have a legitimate case, but when I read that she was entitled to millions of dollars in salary, benefits and other compensation as part of her employment agreement, I quickly lost interest in the story.

·         Scale – Together with the need for a sympathetic set of victims, this is perhaps the most significant combustion point. Consider the Madoff scandal: Investor fraud is common, but not when so many billions of dollars and thousands of investors are involved.

·         Topicality and trends.  I call this the shark attack syndrome.  Each year (typically at the beginning of the summer), there is a news report of a swimmer attacked by a shark.  Then another and another.  It would seem the memo went out to all sharks – “Attack!” (And let the media know)” In fact, media love trends .  If a situation fits into an existing pattern, or is otherwise topical for other reasons, the greater chance it will escalate.  When I was heading media relations @ Texaco in 1996, the company faced a mammoth crisis caused by the release of audiotapes of executives seeming to use racial epithets  in discussing a race discrimination case the company was facing.  It made national headlines because of the nature of the matter.  But the media attention was compounded because the day after the matter was first reported in the press, Californians went to the polls to vote on Proposition 29, a referendum challenging affirmative action.   So the Texaco case became the poster child of the larger issue of the state of race relations and opportunity in America and the media attention was disproportionately large relative to the incident itself.

·         Timing.  Speaking of race, the alleged discrimination by the Valley Swim Club in suburban Philadelphia against a local day camp ignited into a national story. Why? Timing.  Not only did the story deal with a summer day camp at a time of year when millions of children are enrolled in summer camps, but the story also broke on a weekend, when the amount of news to be covered drops, forcing the 24-hour news programs to milk every last bit of life from an event.  Here we see a number of these combustion factors at work – timing, topicality, and a sympathetic set of victims.  (Post-script:  In early November the Valley Swim Club filed for bankruptcy, citing the subsequent lawsuit around this controversy as a contributor to its problems).

·         Hypocrisy.  When a politician who has based his career on law and order or in promoting religious or family values is caught soliciting prostitutes or cheating on his spouse, that politician shouldn’t be surprised at the tsunami of media attention.

·         Compelling Images.  What nearly wrecked Michael Phelps’s career in product endorsements was not that he smoked pot, but that someone happened to have a camera to capture the moment and then post it to the internet.   In another example, the recent fire at the gasoline storage facility in Puerto Rico captured enormous amount of media interest.  Why?   Certainly not because of any death or injuries, or widespread destruction (injuries were minor, there was virtually no damage outside of the facility itself, and it didn’t impact the availability or price of fuel in the area.)  In other words, a non-event.  But the images made for good television.

·         Viral videos.  We live in a YouTube world.  The Internet and personal technology can spread a scandal faster than Al Gore could have imagined when he invented the internet (J).  Just ask Dominos Pizza, United Airlines, Michael Richards, or player on the University of New Mexico’s women’s soccer team who is famous for all the wrong reasons due to her rough play, captured on video. 

·         Mismanaging the crisis.  Last year’s episode involving auto company CEOs, their corporate jets and Congressional hearings about bailouts has become a case study in mismanaging a crisis (or at least one element of it).  Typically one doesn’t see big companies mismanaging a crisis, as there are enough checks and balances in place (and consultants).  Celebrities often seem to have two left feet when it comes to handling their own problems.  While Don Imus’ joke about the Rutgers University women’s basketball team was in bad taste, it was the way in which he so completely mismanaged the fall-out that led to his demise. All he had to do was to use his own radio program – where he already enjoyed a reputation of hosting provocative discussions of topics of the day — to have a frank talk about race in our society. Instead, he hesitated with his apology and then relied on bad advice that just compounded his problems.  He may be back on the air with another network, but the episode will follow him (and his Wikipedia entry) forever.

·         Deceit – They lied and they got caught lying. Eliot Spitzer, Rod Blagojevich, Mark Sanford.  Sammy Sosa, Pete Rose.  Enron, Worldcom, Adelphia, Tyco.  Say no more (also see #7, above, Hypocrisy).

·         Irony – Generally, when a company or public personality (politican, entertainer, etc.) turns out to be the opposite of what they purport to be, that’s irony.  BP spent hundreds of millions of dollars (maybe more) over the better part of a decade in an effort to convince the public that they were different than other oil companies, better than their competitors, and were committed to the environment, clean energy technology and reshaping the energy sector (“Beyond Petroleum”).  Perhaps employees didn’t get the message about this radical shift.  In short order, the company faced a fatal explosion at its Texas refinery (subsequently linked to decisions to cut corners on safety and maintenance), an oil pipeline spill in Alaska, and a criminal investigation of price fixing.  One could argue that the reputation damage suffered by BP would not have been as severe were these same events to occur to another oil company that didn’t try so hard to convince people it was something it wasn’t.

·         Bad luck, or wrong place/wrong time – Sometimes companies find themselves in the midst of a nightmare through no fault of their own; they just happen to be in the wrong place at the wrong time.   For instance, in early 2006 DP World, a company with a stellar record and reputation, was set to announce that it had won the contract to manage port operations in six major U.S. markets.  However, because of internal political issues in the U.S. and the anti-arab xenophobia which was unfortunately still too prevalent in post 9/11 America, this became a major political firestorm in the U.S., and the company was forced to withdraw from the contracts.

So, what is the lesson here?

A Monday morning quarterback will always look smart in conducting a forensic autopsy of a crisis.  But such Monday morning analysis doesn’t help on the preceding Saturday.  Of course, if I could predict the future with certainty, I would have won the Powerball lottery many times over.    The problem is, I cannot.  Nor can anyone else.  So for us mere mortals, we can use these combustion points as yardsticks to guesstimate how severe a crisis may become, and we plan accordingly.  But the really smart reputation manager will have plans ready for all levels of crisis, and be able to throttle up or down depending upon the course the crisis takes.

Yesterday’s incident involving the six year-old boy who was believed to be in a runaway helium baloon is certain to become one of the strangest episodes in history.  And with the boy vomiting on live national television this morning and questions over whether this was a hoax, it is certain to get even weirder.

But aside from its entirely bizarre nature, this incident has illuminated what I call the “Jon & Kate Syndrome” — the perverse marriage of publicity-seeking people willing to exploit their own children in their quest of riches and fame, and 24-hour cable networks, who put sensationalism and voyeurism ahead of values (journalism AND family).

I don’t fault the networks for covering the story — it is certainly interesting.  However, what I do challenge is the decision of the parents to allow their children to be included in television interviews, and the networks for allowing the children to be included; even asking questions of the children.  Is there not a single producer or booker out there who is willing to say, “Hey — let’s think this one through.  Are we compromising the story if we interview the parents WITHOUT the children being on the air?”  Evidently not.

All I can imagine is that these parents are so blinded by the klieg lights and their own quest for fame (in other words, just like Jon and Kate) that they either lose sight of, or abandon, their obligations to protect their children, and act in the best interests of their kids.

Does anyone believe that these children will benefit from the spotlight?

As for the cable networks, does anyone believe their ability to tell the story is compromised if the kids are not on camera?

The answer to both questions, of course, is “no.”

I was watching Campbell Brown’s program last evening, and she was doing a competent job in exploring this story, and all its possible angles (including the exploitation of the kids).  And she describes the personal anguish she felt, as a parent, as she watched this incident unfold.  But at the end of her program, what does she do?  She puts in a plug for the Larry King Live program, which will feature the “balloon” parents and their children!

It’s simply a matter of time before a legislator proposes a law to criminalize such parental bad behavior.

What does this have to do with crisis communications?

Not much really, but as a parent of 4 young children, my horror at the idea of a small child being carried away by a runaway balloon was second only to my disgust at parents and networks exploiting vulnerable children.

This incident is further proof that the networks will choose sensationlism ahead of sound journalism.  And just as drug pushers enable drug addicts, so too do the networks enable these publicity-seeking irresponsible parents.

As communications and reputation managers, we should keep that in mind should we find ourselves in a situation that is “made” for television news.

Schuyler Brown had an interesting blog posting on the HuffPost yesterday… http://www.huffingtonpost.com/schuyler-brown/enter-the-golden-age-of-p_b_260078.html.

In short, she argues that PR is essentially dishonest, and the emergence of social media will somehow spawn an increase in dishonest PR.

The evidence she uses to advance this thesis?

The current debate over healthcare reform, where both sides have distorted the facts, demonized the opposition and inflamed the emotions of people – at the expense of rational, reasoned, fact-based dialogue.

To be sure, these politicians, spurred out my political consultants —  are driving an “end justifies the means” approach. 

But to paint the entire PR profession with the broad brush of dishonesty because of the conduct of politicians and political consultants is baseless and no more productive than the behavior of the protestors at the health care town calls  accusing the Obama administration of being Nazis and socialists.

Ms. Brown’s assertion is sort of like saying that because of a single crackpot doctor peddling false hopes and bogus cures, we must conclude that all doctors are inherently bad, and indeed the practice of medicine is evil.

Now I am not going to stand up and defend the honor and behavior of everyone who has ever worked in public relations, because I know that there are the good, the bad and the in-between.  However, slamming the entire practice is wrong in both substance and spirit. 

The fact is that organizations – be they public companies, government agencies, not-for-profit enterprises, schools, hospitals, etc. all recognize the importance of building trust through effective communications – whether it be through paid media, earned media or tweets.  And they are smart enough to reach out and seek help when they need it.  That’s what we do.

Moreover, the better ones in our business understand the need for practicing our trade with a high degree of ethics, transparency and honesty.  Why?  Because if we were to do otherwise, our reputation would suffer.  And frankly our reputation is the most valuable capital we possess.  So we guard it carefully.

Now, with respect to the notion that the emergence of social media is spawning a golden age of PR, Ms. Brown may be on to something.  The emergence of the internet and social media, the tectonic changes confronting the traditional media, and the changing behaviors of consumers in the way they gather and process information all point to the need for a better understanding of how organizations can adapt and most effectively communicate with the people important to them – be they customers, shareholders, employees or others.

I spend much of my day trying to make sense of these trends and helping clients to navigate these new paths.

If this means a golden age  for PR, it is because the market is driving it, not PR people.

The concept of trust - the confidence that the public holds in private and public institutions - has finally succumbed after a long struggle.

The final blow was perhaps the revelation last week that the performance at last week’s Presidential Inauguration by the classical musicians Yo-Yo Ma, Itzhak Perlman, Gabriela Montero and Anthony McGill was actually pre-recorded music, and the artists were only pretending to perform for the millions of Americans who attended the historic event, and the hundreds of millions more watching on televisions around the world.

Back when I was in college, I was enrolled in a science class where the professor was fond of asking the question, “Why is it that everything you know just ain’t so?”

Of course, that rhetorical question was intended to force us to challenge the assumptions we had about science.  But it is equally relevant to the worlds of politics, the economy, business and society.

For the sake of this discussion, “everything you know” refers to the trust we have long held in public and private institutions, even in the face of evidence that said trust was improperly placed.

However, events of the past two years have so shocked our collective conscience that institutions (corporations, politicians, government agencies, etc.) will need to spend many years in the proverbial “time out” chair, and will need to demonstrate genuine remorse, sustained good behavior and carry out acts of selfless conduct in the public interest before we will again bestow up them the sacred trust which they have so completely squandered.

Consider the following episodes we have witnessed (or suffered through) in recent years…

1. The Abu Ghraib scandal, the arrogance of “Mission Accomplished” and the insensitivity of our federal government in the wake of Hurricane Katrina - events that, taken together, were nearly as damaging to the public trust in the Presidency as Watergate.
2. The baseball steroids scandal - Not only did we see athletes show utter contempt for our national pastime, we also saw headline-grabbing members of Congress creating a spectacle to serve their own purposes with little regard for the right of due process.  And at the same time causing us to wonder, “With all the problems our country is facing, should this be a priority for our Congress?“
3. The subprime debacle - where we saw in spades the unchecked greed of people who cared more about their own wealth accumulation than the plight of duped borrowers and the fragility of our economy.
4. The related collapse of commercial and investment banks, where it seemed executives were worried as much or more about their bonuses and corporate perquisites (i.e., corporate jets) than they were about the downward spiral of the economy.
5. The breathtaking fraud that seems to be pervasive in investment community, as exemplified by such scoundrels as Bernard Madoff and Marc Dreier, among others.
6. The demise of the auto companies, and their crawling to Congress, where both Congress and the media took far greater interest in the triviality of the CEOs travel arrangements than in the serious and substantive challenges facing the auto industry and our economy.  Considering that the Congress willingly gave the Treasury Secretary carte blanche to squander $350 billion of taxpayer money in the TARP program, only to then force the auto CEOs to carry out a humiliating kabuki dance in order to receive a fraction of that in order to save millions of American jobs is even more shameful.
7. The cheating by coaching staffs in the NFL, where we have come to learn that everyone does it, but only Bill Belichick and the New England Patriots got caught.
8. “Made in China” - A term which is now as synonymous with “dangerous” as it is with “low cost,” as we have seen with the reports of lead-laced toys and food products laced with melamine, which has been linked to cancer and other serious health conditions.
9. The Satyam scandal in India - where it now seems that when American industry outsourced much of its business to India, it also outsourced the concept of accounting fraud.
10. The funny-if-it-wasn’t-so-sad comedy from last summer, when the FDA insisted that rotten tomatoes were at the heart of a salmonella outbreak, only to later admit they weren’t and, instead, maybe it was peppers, but they couldn’t be certain.  While in the course of causing hundreds of millions of dollars of losses for farmers, food processors, retailers and restaurants (and causing immeasurable anxiety for consumers), this episode exposed how broken our food safety system is, and how the FDA’s actions seem more motivated by political fear than by science.
11. The never-ending litany of exposes of politicians accused (or convicted) of having their hands in the cookie jar - Ted Stevens, Sharpe James, Rod Blagojevich, Charlie Rangel - or politicians who’s conduct is guided not by their brains, but by certain organs found south of their waistbands - Elliot Spitzer, John Edwards, Kwame Kilpatrick, etc.  Now I know that political corruption is the second oldest profession, but nevertheless such revelations are profoundly damaging to the public trust, particularly when the politicians in question claimed to be such protectors of the public trust (Spitzer, Edwards).

The net result of these events - and these are only the most notable of many - is that the public and the media, will look at all institutions - public, corporate, etc. - with an even greater skeptical eye than ever before.

In the court of public opinion, companies and other institutions are now guilty until proven innocent.

So executives facing a crisis or serious challenges cannot expect to receive the benefit of the doubt from the media, or the public.  Even companies whose performance and conduct have been above reproach will suffer the consequences of this loss of trust.

At least for the near-term, the public will look at even the good and honorable performers with a suspect eye.  Can they be believed?  Is their performance legitimate, or illusory?

As Sir Martin Sorrell told the Institute of Public Relations last November, in these times companies need to think about communicating more, not less.  But that communications needs to be well-grounded.

An old boss of mine used to say that share price was based on two factors - current performance and expectations of future performance.  Today, however, the emphasis is on the former, whether it be about share price or reputation.  The willingness to believe an organization’s assertions about future performance has been too seriously eroded to be given any credence.

I have been around the business world long enough to spot trends (or fads, depending upon one’s view).  For a period we were all enamored with “quality.”  Then it was “diversity.”  After that, “the power of the brand” and “innovation” were the MBA buzzwords.

Today - and I suspect for some time to come - the mantra for both the public and private sectors alike will be “transparency” and “responsibility.”

“Transparency” in the sense of how institutions convey information about themselves (and what information they convey), and “responsibility” in terms of the manner in which they conduct themselves.

In the January 24 issue of the Wall Street Journal I saw a half-page ad promoting an upcoming conference, “2009 Global Ethics Summit.”  The headline for the ad read, “Win the Battle Against Corporate Corruption - Worldwide.”  The sub-headline promoted “Effective Compliance and Anti-Corruption Strategies for 2009.”

My initial reaction to seeing this ad was, “Do people really need to attend a conference to know how to fight corruption?  Is the understanding of and adherence to values now dependent upon what we learn at a conference?”

What a sad commentary on the state of the world we live in.

Upon further thought, though, I realized it was the sub-headline that captured the disconnect that is at the root of so many problems.

Compliance is simply adherence to the letter of the law.  It is not necessarily adherence to values.

Too many companies and corporate executives - it would seem - confuse compliance with good behavior.  People (consumers, voters, investors, etc.) don’t reward companies for compliance.  This level of performance is assumed, it is not rewarded.  Rather, the public expects a higher level of performance; an adherence to a set of values that is sometimes difficult to define, and the definition of which is often shifting.

The challenge for companies and other institutions going forward is to properly define that expected level of behavior, align its performance with it, and ensure there is no delta between their actual performance and stakeholders’ expectations of performance.  That will satisfy the “responsibility” requirement.

But they will also need to communicate with transparency.

Main Entry:

apol•o•gy 

Pronunciation:

\?-’pä-l?-je\

Function:

noun

Inflected Form(s):

plural apol•o•gies

Etymology:

Middle French or Late Latin; Middle French apologie, from Late Latin apologia, from Greek, from apo- + logos speech — more at LEGEND

Date:

1533

1 a: a formal justification : DEFENSE b: EXCUSE 2a2: an admission of error or discourtesy accompanied by an expression of regret <a public apology>3: a poor substitute : MAKESHIFT

That’s the definition of “apology” from Merriam-Webster.

So what?  You ask.

The topic of corporate apologies is something I wrote about earlier in the year, but I feel compelled to revisit the matter, after reading a piece in the October 21 issue of USA Today entitled, “Why ’sorry’ isn’t in many CEOs’ vocabularies anymore.”    

The take-away of the story was as follows:  “As the world comes to grips with the biggest financial crisis in seven decades, the mea culpa machine has ground to a halt. Apologies, encouraged in recent years by the crisis-management industry, have dried up — even apologies deployed as a business or political strategy.”

First, I am not so sure I agree with this.  I have seen no quantitative data to support such a conclusion.

But the following passage is what caught my attention:

Companies have found that heart-felt apologies can decrease the likelihood of lawsuits if they’re well crafted and don’t come off as “Sorry I got caught,” but express regret, assume responsibility and map out a plan to avoid repeating the offense, says Leslie Gaines-Ross, chief reputation strategist at public relations firm Weber Shandwick and a longtime student of apologies in crisis management.

I have two problems with this.

First, to suggest that a company can reduce or eliminate its litigation risk by simply apologizing is a pretty bold claim to make, and rather implausible, if you ask me.  If indeed this were true, wouldn’t every general counsel simply tell the CEO to apologize?  That would certainly save the companies millions of dollars, and ease the strain on our courts.

I fear that people are drawing conclusions about the power (or danger) of apologies with little or no quantitative data to support those conclusions.  I have been in this business for more than 20 years, and have worked with any number of companies involved in litigation, and I don’t recall an instance where a plaintiffs’ lawyer has been able to convince a judge that a letter of “apology” published in a newspaper is alone tantamount to acknowledging liability.

Nor have I seen an instance where such a communication enabled a company to prevent the filing of litigation.

The second problem I have with this assertion is the notion that a company should “assume responsibility.”  If the company believes it is responsible for a problem, then it should say so.  But I would never counsel a company to make such an assertion unless it was certain of its responsibility.  That’s bad PR advice, and even worse legal advice.

According to Merriam-Webster, an apology is an admission of error.  I have seen lots of letters from CEOs and companies where they express sympathy or regret or understand for a situation, without saying “it’s our fault.”  Does that make the communication any less effective?

In many cases, the fault is not the company’s.  So why SHOULD it say, “I’m sorry” if the implication is, “it was my fault”?

A colleague told me about a piece of legislation being considered in Canada, The Uniform Apology Act.

The provisions of the proposed law make the protection accorded to apologies clear by providing, first, that an apology is not an admission of legal fault or liability, express or implied; second, that an apology is not relevant in determining fault or liability; and third, that an apology is not admissible in evidence to establish liability.

That we have come to the point where we need legislation to protect a company that offers an apology is a sad statement about the condition of our society.

But as I said in my earlier posting on this topic, way too much is made of apologies.  Yes – companies should communicate empathy and concern.  And when a company is responsible for a problem, it should say so, and apologize if appropriate.

But a company need not fall on the sword simply because it is seen as being the right thing to do.

Companies successfully work their way out of a problem because they address the problem, and not just the perception of the problem.  In other words, a business problem requires a business fix.  A letter of apology or regret published in a newspaper solves nothing.  And the fact that such a tactic is now seen as “required” in the PR tool kit diminishes its value even more, precisely because it is seen as required and thus not genuine.

Don’t get me wrong.  I am not suggesting that such communications are unnecessary.  I simply believe they have very limited value, and alone they won’t lift any burden off a company in crisis.

In my view, the entire discussion of apologies is overblown.  If people fixate too much with the tactic of apology (or expression of regret), then they are ignoring the far more important issue of root cause of the problem, and its solution.

#   #    #

The recent hubbub about Steve Jobs and rumors of his health exposes a considerable chasm between what companies feel obliged to reveal, and what some investors and media believe is their right to know.

And given that the media have nothing better to do than to chatter about how Steve Jobs looks (never mind the growing recession, the crisis in the banking sector, collapsing financial markets, skyrocketing energy prices, collapsing housing prices and a war or two), there has been no shortage of chatter in the press and the blogosphere on the topic.  The following are just some of the chatterboxes on the topic.

http://blogs.wsj.com/health/2008/07/28/do-apple-investors-have-right-to-steve-jobss-health-info/

http://news.cnet.com/8301-13579_3-9996676-37.html

http://www.alleyinsider.com/2008/7/sorry-apple-steve-jobs-health-is-not-just-a-private-matter

Given the average age of Fortune 500 CEOs, and knowing the stresses a CEO faces, I will venture a guess that there are any number of companies, and boards of directors, that are facing the question of how to address the health of the CEO.

So for communications managers, this is a fair issue to ponder, as all of us may have to deal with it at some point.

So here’s my POV.

If we assert - as we do - that a CEO represents an important element of an organization’s reputation (and, hence, perceived value in the marketplace), then it only follows that the condition and performance of that CEO will weigh heavily on the company’s reputation. This would suggest that the condition of a CEO’s health is fair game and companies should anticipate that investors and media will expect a degree of openness and substance from a company in this regard.

Does this mean that companies must feel obliged to include the results of the CEO’s annual check-up in their SEC filings, just as Presidential candidates are expected to disclose their medical records?  Of course not.

However, it is a matter of political reality that we live in an age where transparency is seen as an obligation, not just something to be rewarded. That expectation of transparency extends to the public face of the company — the CEO.

This expectation is even greater when the CEO assumes a high public profile, such as Steve Jobs, Warren Buffett, Michael Dell, etc. And when the CEO chooses to become a blogger, he/she is further inviting the investing public, customers and the media to view him/her as an open book.

Claiming ”it’s a private matter” may be seen as antiquated and unsatisfactory as “we don’t comment on litigation,” and as self-incriminating as pleading the 5th Amendment.

As we are seeing with Apple, uncertainty about the CEO creates anxiety among investors, and the chatter simply compounds the anxiety.

So the situation presents some difficult questions for the company (or any company in a similar situation), and it suggests the need to address the ambiguity that exists as to a company’s obligations to disclose.

When is a CEO’s health the business of the investor?

Certainly, if any health issues impede the CEO’s ability to do his/her job, that would seem to be a matter warranting a company comment or announcement.

But what if the CEO is doing fine, but had prior problems with cancer, heart trouble or other such maladies.  Should the company feel obliged to keep the public alerted every time the CEO sneezes, or has an MRI?

Both Joe Nocera of the New York Times and John Boudreau of the San Jose Mercury News have written thoughtful pieces on this issue, and they are worth a read. 

There are two angles to the Steve Jobs/Apple story that make this issue more complicated for the company.  First, Jobs has spoken in the past about his bout with cancer.  And it’s a truism that once a company or an executive starts to speak on a topic, they are expected to continue to speak.  Second, the company made differing and ambiguous statements in response to questions about Jobs’ health.  Perhaps the most troublesome is the separate statements from the company that Jobs’ health “is a private matter” and that he is simply suffering from “a common bug.” 

Understanding that it is our inalienable right to read tea leaves, the former may be interpreted as an acknowledgement that Jobs does have a health issue, but it is no one’s business but his own.  The second statement seems to imply that whatever Jobs is suffering from is no different than what all of us suffer from over time.

But is the “common bug” response potentially misleading?

Joe Nocera, in his column in Saturday’s Times, reports that Jobs called him and shared with him — on an off-the-record basis — information on his health.  All Nocera reported was, “While his health problems amounted to a good deal more than ‘a common bug,’ they weren’t life-threatening and he doesn’t have a recurrence of cancer.“

Frankly, this is no less ambiguous than “a common bug.”  But what I take away from this is that Jobs has some serious health issues, but nothing that will kill him.  However, it doesn’t answer the question, “Does his health situation impede his ability to carry out his job?”

At the end of the day, perhaps that is the test that companies should apply.

(If, down the line, Jobs’ health takes a turn for the worse, and it is determined that it is somehow related to his existing condition, get ready for those shareholder lawsuits claiming the company mislead investors.)

In short, companies need to understand the landscape of the “CEO Health” question. Right now, Apple and Steve Jobs are garnering the attention. But the first company that chooses to be fully transparent on such an issue will set the benchmark for all other companies to emulate.  And once a company chooses to be fully transparent, every other company that chooses to be less so ought to be prepared for the question, “Why aren’t you as forthcoming as the other company?