Archive for October, 2008
I did not realize that this was a real word. However, according to the dictionary, disreptuation is a noun that means loss or want of reputation or good name; dishonor; disrepute; disesteem. “A disreputation of piety.” Jer. Taylor. I was not sure who Jer. Taylor was so I looked him up in wikipedia and he was a clergyman in the Church of England in the mid 1600s. He was sometimes known as the “Shakespeare of Divines” for his poetic prose. So now we know. Disreputation is actually a good word to use today for all those institutions that have been found in disrepute today. As they begin to repair their disreputations, they had better be reminded that this is no word that they want pinned on them.
I was on Good Morning America (CEOs Refuse to Apologize) yesterday talking about CEO apologies of which we have seen little of late. This interview was a follow-up to the CEO apologies article by Del Jones in USA Today this week that I posted on my blog. Just thought I would alert you. The most interesting part was that several women in my office seem to blow dry their hair at about the time it aired – 7:45am. Some women told me they were startled to see me and turned down the hair blower volume to hear what I had to say. A guy I know also wrote me so he may have been blow drying his hair too.
GMA had an interesting angle since they were commenting on the absence of an apology from former federal reserve chairman Alan Greenspan. Weber Shandwick’s research found that 58% of the blame for a crisis belongs to the CEO. I bet if the study was done today, the figure would be closer to 75% and same goes for government officials.
The absence of CEO and government official apologies has become deafening.
Del Jones’ article in USA Today yesterday on CEO apologies is an excellent review of the reasons why CEOs owe the public an apology about the daunting financial peril we find ourselves in today. Del did an heroic job in pulling together various viewpoints on the state of CEO apologies today. I am quoted in the piece since I have been studying and researching CEO apologies for some time now. The article made me think of a quote I found recently when speaking in Rotterdam on reputation recovery. I had reviewed reports on Shell’s town hall meetings held in 50 cities across the U.S. Shell initiated these meetings to show the human side of big oil and understand why Americans were so openly hostile to the industry. This particular quote stood out in the report I read on these insightful meetings: “If a lack of communications created the problem, maybe it can get us out of it.” [Somewhat paraphrased quote] Communications from the top can help us find our way out of the transparency-lessness world we are now living in. Make sure to note the forward-thinking quotes from the founder of Kyocera, Kazuo Inamori.
Why ‘sorry’ isn’t in many CEOs’ vocabularies anymore
By Del Jones, USA TODAY
Elected officials in the past have said “I’m sorry” for everything from marital affairs to cross-dressing to corruption, and CEOs tossed around apologies like horseshoes at the company picnic.
Not anymore. 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.
Legal concerns weigh heavily on any words that might be construed as an admission of guilt. But also weighing heavily is the silence from politicians, regulators and past and present CEOs at Fannie Mae, Freddie Mac, AIG, Bear Stearns, Countrywide Financial, Merrill Lynch and Washington Mutual. It’s been clear for weeks that the financial crisis has dammed the free flow of credit. But with each passing day, it’s also appears that the crisis has likewise dammed the free flow of taking responsibility.
When Lehman Bros. CEO Richard Fuld testified on Capitol Hill this month, members of Congress grilled him to own up. Fuld said he takes full responsibility for his decisions, that he “felt horrible about it,” but that the largest bankruptcy in history was due to circumstances beyond his control. Likewise, a trio of former AIG chief executives — Hank Greenberg, Martin Sullivan and Robert Willumstad — deflected blame in oral and written testimony to Congress.
Finger-pointers in Congress have found cover in public opinion polls that show most people blame CEOs for the crisis. But there is blame to go around, with Democrats choosing to ignore warnings about the possible implosion of Fannie Mae and Freddie Mac and Republicans supporting less regulation, says Harvard leadership expert Barbara Kellerman, who wrote a 2006 article in the Harvard Business Review titled, “When Should a Leader Apologize — and When Not?”
The absence of apologies has fed widespread outrage. Even CEOs in other industries are upset that they must now negotiate their companies through what appears to be an inevitable recession. While few CEOs in the USA have been outwardly critical of their counterparts in the financial sector, the founder and chairman emeritus of Kyocera, an electronics giant in Japan — where there is a culture of admitting mistakes — says what others may be thinking. CEOs who had a hand in the mess “should acknowledge their role and apologize, unreservedly, to their shareholders, stakeholders and the U.S. taxpayers,” Kazuo Inamori told USA TODAY through an interpreter. “They should sincerely reflect on their own management methods. They were too preoccupied with their own desires. They should acknowledge their own faults and, yes, apologize.”
However, no one in the U.S. believes they can get to the top by falling on their swords, says Dan McGinn, CEO of TMG Strategies, a public relations firm that counsels companies on threats to their reputations. McGinn says his personal belief is that there is more room for humility and honesty than most executives realize, and that the public hungers for candor and authenticity. Apologies, McGinn says, are wrongly perceived as a sign of weakness.
Yet, in the years before the crisis, apologies had become common, almost a sport, and examples can be found on YouTube from everyone from Don Imus to Jesse Jackson to Mel Gibson to Seinfeld’s Michael Richards, to Jim Cramer of CNBC’s Mad Money. Lawyers recommend against admitting wrongdoing, but companies had come to discount that advice to save reputations and get past bad news. In 2004, professors from the University of Michigan and Stanford University found that companies that accepted blame for poor performance in annual reports were more likely to outperform the market the following year.
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.
Great apologies of the past
Past corporate apologies have come from JetBlue, Amazon, Nielsen, Seagate Technology, Sun Microsystems, Southwest Airlines, Texaco, Procter & Gamble, United Airlines, Ford Motor, Toshiba, Merck, Mattel, Taco Bell and Nike. Even Hank Paulson, now Treasury secretary and a key player in the global attempt at economic resuscitation, apologized to employees in 2003 when he was CEO of Goldman Sachs for implying that most of them were irrelevant to the firm’s success.
Steve Jobs issued an apology when Apple sold iPhones to its most eager customers for $599, then slashed the price two months later to $399. Whole Foods CEO John Mackey apologized for writing anonymous posts on financial message boards. Steve Hughes, the former CEO of tea-maker Celestial Seasonings, once wrote a letter of apology in the Boulder, Colo., Daily Camera for poisoning prairie dogs on company property.
Those may have seemed like bad deeds at the time, but they pale compared with the pink slips about to be distributed as a result of the credit crunch. The clock can’t be turned back, but a few sincere “I deeply regrets,” would help shift focus from what has happened to what needs to happen next, Gaines-Ross says. A 2006 Weber Shandwick study found that apologies had become so commonplace that their ability to allay public concern may be eroding. Even so, “CEOs should realize that an apology is not a sign of weakness, but an act of strength,” Gaines-Ross says.
Not sorry, and proud of it
Golden Gate University psychologist Kit Yarrow says both CEOs and elected officials operate in dog-eat-dog worlds where strength is rewarded and those with self doubt and regret don’t make it to the top. “It’s entirely possible that these individuals haven’t internalized that they’ve made mistakes and therefore, don’t feel responsible,” Yarrow says. “Many of the folks involved have trained themselves to avoid introspection and second-guessing. It gives you a thick skin and a sense of superiority that shields you from caring what people think of you. And if you don’t care what people think, you certainly wouldn’t feel the need to apologize.”
Other dynamics may be at play. The magnitude of the crisis has leaders frightened into taking the Martha Stewart/Pete Rose path of stubborn denial, which may have helped put one in prison and blocked the other from baseball’s Hall of Fame. The bigger the injury, the longer the wait. By the time Bridgestone CEO Masatoshi Ono apologized to the Senate Commerce Committee in 2000 for faulty tires, four years had passed since the problem first appeared and the Bridgestone/Firestone incident had become a case study in how not to handle a crisis. Ono retired shortly afterward. In 1995, Helge Wehmeier, then CEO of Bayer U.S., expressed deep regret on behalf of Bayer’s original parent company, I.G. Farbenindustrie, for its having been complicit in the Holocaust. Ten years later, then-CEO of Wachovia Ken Thompson apologized that two companies the bank acquired had owned slaves.
A key reason for the sudden lack of apologies may be that there is so much cover afforded. The financial problem is complex, and culprits abound, Kellerman says.
“When the waters are this muddy, it’s difficult to assign blame,” Kellerman says. She calls such cover “the blessing of many hands,” saying it allows those people and institutions responsible to hide, or even go on the offense and blame others.
“Individuals can ultimately convince themselves that they did what anyone would do in the same situation,” Yarrow says. “With so many players, it’s easy to shift blame. Under stress, the mind finds ways to protect itself from truths that can damage a positive self-image.”
Silence is golden during litigation
The strongest argument for silence may be the courtroom. Grand jury investigations have begun, Fuld and other executives have received subpoenas, and the standard advice of criminal defense lawyers is to say nothing, says Columbia law professor John Coffee. “Everyone remembers that six months after the fall of Enron and WorldCom, indictments began to come down, and it rained indictments for the next year,” he says. “Those who accept responsibility might become the lightning rod that attracts the first bolt of lightning from the prosecutors.”
“After two decades of class-action litigation, most general counsels will caution their CEOs against apologizing until the facts are thoroughly investigated and liabilities are determined,” McGinn says. “This is in conflict, of course, with the expectations of the media and the public.”
There is also a fresh crop of leaders running companies most often implicated in the crisis, which has so far allowed old leaders to step into the shadows. Edward Liddy replaced Willumstad at AIG, Herbert Allison replaced Dan Mudd at Fannie Mae, and David Moffett replaced Richard Syron at Freddie Mac, all last month. “Time is running out for apologies to be effective,” Gaines-Ross says. “If a few CEOs act contrite and take action, shareholders might breathe a sigh of relief and move on.”
Wrongdoers will have cover only for so long, and some CEOs and politicians eventually will be identified as key culprits, Kellerman says. She predicts they will likely be exposed by shareholder activists and Internet bloggers. Few hold hope of apologies from elected officials, who don’t have to protect the viability of a company and have only their own personal reputations to defend. Congressional apologies often require smoking guns and more often involve sexual scandal than acts of public harm. In Congress, harmful actions are blamed on others, Gaines-Ross says.
“It’s hard for most of us to imagine how someone could be responsible for such damage and loss to others and not feel an urgent need to apologize,” psychologist Yarrow says. “Obviously some of those investment bankers and politicians aren’t like the rest of us.”
“I think that the heavens, or natural common wisdom, may be suggesting that we try to live more down-to-earth and honest lives, ” says Kyocera’s Inamori, who is a Zen Buddhist priest. He says profit is society’s reward for serving its interests.
“In order to restore and revitalize capitalism, it is crucial that business executives regain this attitude,” Inamori says.
My friend Ron Alsop just published a new book titled The Trophy Kids Grow Up. More about the book and Ron at www.thetrophykids.com. He was a longtime reporter and editor at The Wall Street Journal and previously wrote a terrific book on reputation. His newest book is a must-read for those of us who are labeled “helicopter parents” – the latest trend of parents who serve as career counselors for their millennial children. I confess to being one.
As the Millennials (born between 1980 and 2001) join the workforce, we had better get used to them because it turns out that they are actually a larger cohort than boomers – 92 million vs. 78 million. These prized trophy kids are going to shape the workforce for years to come. Millennial kids will keep managers guessing over what makes their clocks tick. As Alsop describes them, they have a reputation as “the most demanding and most coddled generation in history…most millennials don’t excel at leadership and independent problem solving. They want the freedom and flexibility of a virtual office, but they also want rules and responsibilities to be spelled out explicitly. ‘It’s all about me,’ might seem to be the mantra of this demanding bunch of young people, yet they also tend to be very civic-minded and philanthropic.” Alsop interviewed parents, teachers, educators, recruiters, and corporate managers to find out what Millennials were like at work.
I often envy my kids who have the advice of two working parents. My mother did not work outside the home until years later and that was just to keep busy. The challenges I have faced at work were not those that she ever experienced or could advise on. My father was very forward-thinking but in a completely different line of work than I am.
One summer ago, my daughter the Millennial was working between jobs as an assistant to a boomer entrepreneur. She was startled when her boss chastised her for not being able to write a business letter. He said, “I would think your father would have taught you that.” My daughter majored in semiotics at her ivy league school and is a graphic designer. They did not teach her how to write a business letter or that there was such a thing. The letter she had written was a friendly, casual e-mail exchanging necessary information which is how she and her friends communicated during college years. Thankfully she no longer works for the fellow although we did teach her how to write a business letter.
Ron’s book has many terrific insights and examples of Millennials facing different generations in the workforce today. I just started the book and hope to learn from it.
Found this information through my Google Alerts and thought it was particularly interesting as the world continues to learn more about the city of Wasilla, Alaska (hometown of VP candidate Sarah Palin). The article in the Dallas Morning News gathered information on how several Texas cities were branding themselves, using public relations, identity branding and advertising. Logos seem to be big as a statement about a city’s reputation. Just as regions and countries have branded themselves, small cities are now getting into the act of solidifying their brand. Attracting the best talent, families and business is a full-time job for economic development folks. Reputation matters no matter what the size.
- Carrollton: Agreed last month to pay Development Counsellors International up to $238,000 for logo development, strategic branding, marketing and public relations.
- Farmers Branch: Developed a logo in 2006 with a tree flanked by outlines of houses and businesses, to emphasize the city’s parks and neighborhoods. Cost: about $177,000 over three years.
- McKinney: Approved spending $242,750 in 2005 for branding and promotional tools, including a logo developed for $62,000 by North Star Destination Strategies. The logo – McKINNEY TEXAS: Unique by nature – is intended to blend the city’s historical identity with its suburban boomtown status.
- Mesquite: Contracted with North Star in 2006 for $64,000 to develop the logo MESQUITE TEXAS: Real. Texas. Flavor. The logo highlights the city’s Western heritage while emphasizing services and amenities.
- Plano: Had North Star develop a gold “P” logo in 2005 for the Plano Convention and Visitors Bureau. Cost: about $42,000. The logo is intended to convey the image of clean, high-tech, polished city to out-of-town visitors, especially business travelers. The design is in addition to the patriotic red, white and blue “P” used across the city.
With seismic shifts every day in the financial services industry, we at Weber Shandwick thought it was a perfect time to get the perspective of someone with considerable perspective. That’s why we were one of the sponsors of a speech last week by Gary Stern, president of the Federal Reserve Bank of Minneapolis and the central bank’s longest-serving policymaker. The New York Times references his speech in this article. Some interesting points emerged:
· Stern recommends looking back to the early 1990s as a reference point for the current credit situation. Economic factors including unemployment, interest rates and inflation were considerably worse in the early 1990s than they were when we entered the current economic downturn. Stern reminded attendees that while the 1990s started off sluggishly, the U.S. economy performed extraordinarily well throughout the 1990s.
· The “too big to fail” problem is something that must be addressed. Safeguards should be put in place to ensure that the interconnectedness of large banks doesn’t bring down the whole system if one of them fails. Stern coauthored a book on this topic in 2004.
· Communication is key. While Stern doesn’t believe regulation is necessarily the fix we need, he says regulators must be transparent and communicate details of their actions early and often.
· Stern believes inflation will go down.
Feel free to contact Barb Iverson, head of our global Financial Services Industry Practice, with questions or comments about reputation and public relations in this unique and daunting time.
How to Seize the Storm: Tactics for guiding your company past this crisis–Jack Welch in BusinessWeek on communicating during a crisis. More reason to speak up and rescue your reputation.
Don’t Stop Talking. The fact that crises call for constant, candid communication should go without saying, shouldn’t it? But too often managers react by locking themselves in their offices, where they panic themselves into paralysis in private or with a few close associates. What a morale killer. Your people are scared, and their imaginations are taking them into dark places. Now more than ever you need to alleviate that fear and uncertainty, not with rosy, unrealistic platitudes, but with facts. Tell them which plants or offices will be cut back or closed, for instance, and describe in vivid derail what the competition is up to. And tell them, again and as vividly as possible, what he future will look like if everybody hunkers down for the same goal: endurance and renewal. Then tell them again and again. It will never be enough.
We released a timely survey today. We surveyed employed Americans about the financial upheaval and asked them how satisfied they are with their leadership’s communications. In short, we learned that working Americans are not hearing enough from senior leaders about the global financial crisis. In fact, a huge 70% expect the current economic problems in the U.S. is going to have a negative impact on the company they work for over the next year. Of those, 26% believe their company will have lay offs and 62% said their company will have trouble meeting goals.
These survey findings (conducted with KRC Research) highlight a genuine leadership deficit! A hefty 71% of people felt that their company’s leadership should be communicating more about current economic problems, and 54% have not heard from company leaders at all on the impact of the financial crisis on their company.
By comparison, 74% said that they had heard colleagues and co-workers talking about the issue. If employees are discussing the implications for them of the financial crisis online, at the water cooler or in the halls, you can bet that some of the information swirling around is misleading and inaccurate. This is a perfect breeding ground for rumors and gossip.
During times of uncertainty such as these, employees are thirsty for news and information. Now is the time for CEOs to speak up and speak out. Send out emails, hold town halls, start an internal blog, walk the halls, produce a podcast or webcast and even try old-fashioned voice mail if you must.
The absence of leadership communications is deafening.
So much to write about this week. Reputation continues to astound me as it seems to be the thread that weaves itself through the fabric of the economic meltdown, absence of leadership and communications standstill plaguing organizations. Several items caught my eye this week.
- Industry Reputation: A WSJ/NBC News poll reported that a mere 10% of Americans have confidence in the financial industry. This compares to 36% who said this they had confidence in the sector in 2000. This in an industry in peril unless someone speaks up and out.
- Political Reputation: Love the fact that the Economist is giving my brethren around the world a chance to vote in the U.S. presidential election. Everyone can now vote for Obama or McCain at www.economist.com/vote 2008. This venerable magazine is also providing a global electoral map and will announce results right before November 4th. The voting deadline is November 1st so please cast your vote!
- CEO Reputation: Learned that the Chairman of Chinese computer-maker Lenovo, Yang Yuanquing, moved to North Carolina to better understand American culture and be better equipped to integrate American and Chinese colleagues. Truly deserves an A for effort.
- Country Reputation: 62 companies from emerging markets populate the Fortune 500. Most of these companies come from the BRIC countries and this number is double what it was in 2003 when 31 emerging market companies made it to the popular list.
- Legal Reputation Recovery: Attorney Mark MacDougall of Akin Gump Strauss Hauer & Feld has an expertise in “reputation recovery.” Caught my attention since that is an expertise that I have written about extensively. MacDougall ferrets out false allegations or lies and makes them go away. His investigatory work (“runs what is arguable the world’s best fact-checking department, one that would put The New Yorker to shame”) is widely known. He is quoted by writer Seth Hettena in The American Lawyer as saying: “Our job is to kill the false story. Not the bad story, which is what a PR guy does.” If you are looking for a lawyer, he might be your guy.
- Buffet’s Reputation: The Economist had an interesting sentence in an article on Warren Buffet’s rescue of Goldman Sachs and GE by investing billions in the companies during the financial meltdown. “Indeed, were he not a philanthropist, committed to giving away his billions, the tough terms he has negotiated with both firms might have prompted accusations that he is taking advantage of the desperate.” As Sarah Palin would say, You Betcha.
- Political Leadership Reputation: Did you know that Iran’s president Mahmoud Ahmadi-Nejad has a blog? That Putin is launching a new web site for Russia, www.premier.gov.ru .
On to the next week……
With all the bad news today, I was musing about the value of reputation. Does reputation matter? In an email exchange with a fellow reputation “junkie,” it was all cleared up. I saw the light. Joy Sever, reputation strategist and entrepreneur, wrote back to me with a very perceptive response about reputational worth. She said, “…where there’s a perception, there’s a reputation.” Oh how right she is!
Thanks Joy for the smart insight. I feel better already.